Everything an immigrant needs to buy a home in the USA

HOW TO BUY A HOUSE IN THE USA AS A IMMIGRANT

Did you know that permanent residents and green card holders (US Permanent Resident Card) have access to the same mortgage financing options as US citizens? If you are an immigrant living in another country, you should look into a mortgage/home loan program for foreigners or consider paying for the property in cash. Regardless of your current residency status, you should take a few essential steps to make the home buying process as smooth as possible. Keep reading to discover them!

PREPARING TO BUY YOUR HOME

Before starting to select your ideal home, you will need to determine what purpose the home will be used for. Will it serve as your primary residence? Are you looking for a vacation home or an investment property? Your needs will vary depending on your plans for the house.

If you are looking for a family home as your primary residence, you should consider the day-to-day functionality of your home. You will need to prioritize the number of bedrooms and bathrooms, layout, kitchen amenities, and proximity to hospitals, pharmacies, plazas, traffic, and supermarkets. If there are school-age children living in the household, you will need to compare locations close to schools and the general safety of the area.

If you’re buying a vacation home or investment property, you should primarily consider location, renovation costs, maintenance costs, and potential return on investment.

The location of a home, along with many high-end features and amenities, will be reflected in the listing price. But there are even more factors that can increase your down payment and even your monthly mortgage payment.

INITIAL REQUIREMENTS TO OBTAIN A PROPERTY IN THE US

Income and Employment Status: when you get a mortgage, prospective homebuyers typically expected you to provide two or more recent proof of payment and two two-year income tax returns as proof of employment and financial stability. Your home purchase schedule may need to be adjusted if you need more time to get this paperwork done.

Credit Score: When you are an immigrant buyer, it is necessary to show a credit score of 720 points or higher, although some lenders may want a credit score of at least 780 or higher. If you have a high credit score, you can secure a lower interest rate on your mortgage, whereas if you have a lower credit score, your interest rate will increase.

Down payment: If you do not have a US residency, you will likely need to make a large down payment or deposit on the property, which can range from 20-50% of the total cost of the property.

Homeowners Associations (HOA) and Co-op Fees: Some properties are subject to rules imposed by an organization that oversees all properties and residences within a community—this is known as a homeowners association (HOA) or co-op, and they will require paying a monthly fee in addition to the monthly mortgage payment.

Establish your price range and budget: Buying a home is more than just paying your monthly mortgage. It is very common to hear that buying a home is the most expensive purchase you will ever make, which is why you need to approach the process with a strategy. To avoid getting confused or biting off more than you can chew, you should calculate your debt-to-income ratio, keeping in mind that you will need to account for the monthly costs of utilities, maintenance, and repairs, among other expenses. To make it easier, use a mortgage calculator to estimate what your total monthly payment could be. A good rule of thumb to follow is that the debt-to-income ratio should not exceed 28% to 31%.

Get pre-approved for your mortgage: A pre-approval is granted to you after a lender has verified your entire financial history, including your bank statements, employment history, monthly expenses, credit report, and credit score, usually valid for 90 days. It is recommended that you get pre-approved when you are ready to start buying a home. A pre-approval allows you and potential mortgage lenders to know how much of a mortgage loan you qualify for. A pre-approval simply serves as proof that a lender would be willing to grant you a loan, which leaves the most excited realtors to work with you.

Qualify for a mortgage: If you are an immigrant or visa holder, and you want to get a mortgage, the most important tool you should prioritize will be your Individual Taxpayer Identification Number (ITIN). Even if you are undocumented, as long as you have an ITIN, you may qualify for mortgage assistance from private lenders.

DOCUMENTATION NEEDED TO APPLY FOR A MORTGAGE

When you’re ready to apply for a mortgage, be prepared to show:

Payslips for the last 30 days or other proof of current employment.

Proof of income for the last two years. Any income received from abroad or in foreign currency must be converted into US dollars.

Federal income tax returns for the last two years, including all schedules and attachments. Must be translated into English if in a foreign language.

Official photo identification and, if applicable, resident green card.

Your two previous bank statements for all bank accounts (borrower and co-borrower). They must be translated into English, if in a foreign language.

Your two previous investment account statements (borrower and co-borrower). They must be translated into English, if in a foreign language.

There are several loan options available to immigrants, permanent residents, and non-residents, including:

Conventional Loan: The journey to a conventional loan starts at your local bank. Borrowers can secure a conventional loan with a down payment of just 3%. You should aim for a credit score of 620 or higher, but remember that the higher your score, the better the mortgage interest rate.

USDA Loan: A USDA loan does not stipulate a minimum credit score, but it is recommended that you have a score of at least 640 to qualify.

Federal Housing Administration (FHA) Loan: In 2021, you can apply for an FHA loan with a minimum credit score of 500 and a 10% down payment. Borrowers with a credit score of 580 may be able to secure a loan with a down payment of as little as 3.5%.

Federal National Mortgage Association (FNMA/Fannie Mae): Fannie Mae guarantees mortgages issued by credit co-ops and other financial institutions.

THE PROCESS OF LOOKING FOR A RESIDENCE

Buying a home can be a complicated experience, which is why 74% of home buyers choose to work with a competent real estate agent. Most buyers tend to find their realtor through recommendations from friends or colleagues, and even directly from a real estate website or app. Before agreeing to hire an agent, be sure to have someone work within the law and care for all your questions. Do some research, visit their website, read some reviews, and even make an appointment to know them better, in order to see if they are trustworthy and know the local market.

If you still haven’t found your broker, count on The Chaves Group to help you with all the procedures in a clear and objective way.

When searching for your future home…

Focus on the neighborhood and establishing your price range should be the first step you take as a home hunter. Whether you’re visiting a home on your own or on an agent-guided tour, ask questions about the home’s power grid efficiency, parking options, and neighborhood safety. Write down all the desired features—such as kitchen style, flooring, and appliances. Is the house accessible to public transport? How close are you to your job or family? Be prepared with a checklist in hand to ensure your future home offers everything you need to live with comfort.

Making an offer

Once you’ve found the home you’d like to buy, the next step is to make an offer. At this point, you will normally consult your realtor, who will draft an offer letter to send to the seller. The offer letter is a legally binding document that reflects the real estate laws of the state in which you are purchasing your home. It will include the amount you’re willing to pay for the home, your down payment, whether you’ve been pre-approved for a mortgage, and any other details or negotiations that you think might make you stand out from other potential buyers.

Schedule a home inspection and appraisal

Before making your written final offer, make sure you opt for a home appraisal and inspection. An appraisal is a process by which the market value of your home is determined and provided by your mortgage lender.

On the other hand, a home inspection is an essential tool to find out any property issues. A certified home inspector will examine the structure of the home and check the roof, electrical system, plumbing, basement, and attic, analyzing any issues that exist or may appear in the future. As a homebuyer, you will be responsible for scheduling and paying for the home inspection—usually with the help of your realtor—but the investment is well worth it.

Close the deal

The day has come—it’s time to complete the deposit and get the keys to your new home. If you live in the US, you will meet with your realtor to sign all paperwork, including mortgage documents, repairs uncovered by your home inspector, and details of entry and closing costs.

If you live abroad, you can send the signed paperwork to a specific agent, assign someone to the “letter of attorney” to sign the paperwork on your behalf or send the signed paperwork via electronic signature or email, depending on state laws in which you are making the purchase. It is recommended that you close the deal towards the end of the month, as this will give you more breathing room between the first mortgage payment due and the amount of interest you will need to pay.

RESOURCES FOR IMMIGRANTS BUYING A HOME IN THE US

Whether you already reside in the United States or are currently living abroad, there are a number of resources available to help potential buyers looking to purchase a primary residence or investment property in the United States. Wherever you are in the buying stage, there are a number of organizations and websites that exist to provide legal advice, assistance securing a mortgage, and insight into how your residency status may affect your ability to purchase US property.

Fannie Mae’s Eligibility Guide (MATRIX): This document is a useful resource for non-US citizens—such as green card and DACA holders—to determine if they qualify for mortgage assistance.

US Department of Housing and Urban Development (HUD): The HUD is the government agency charged with providing resources and assistance to homeowners and renters.

National Immigration Law Center: This organization is one of the leading organizations in the US exclusively dedicated to advocating and promoting the rights of low-income immigrants.

SUMMING THINGS UP: HOW TO ASSERTIVELY BUY YOUR HOME

1) Choose the right property

Bigger is not always better when it comes to buying a home. Be sure to consider all aspects of the house as well. Location is one of the most important factors that can increase or decrease costs. For example, a larger home in a less desirable area can often cost less than a smaller home in a more desirable location. Although the listing price of a home can be attractive, you’ll also need to consider the condition of the property and other factors, such as the levy of property taxes. Those are all expenses you need to be ready to handle.

2) Estimate your payout

Lenders prefer it when homebuyers can offer a down payment of at least 20% of a home’s purchase price in cash. You can still secure a mortgage loan for a minimum amount of 5% to 10%, but with initial payments of less than 20%, loans are required to maintain private mortgage insurance (PMI), which is typically 0.2% to 1 % of your loan. The more you invest, the less you’ll need to borrow and the smaller your payments each month. Use the mortgage calculator to help you determine how much you’ll pay each month based on your home’s price, down payment, and estimated loan terms.

3) Consider the additional costs

Don’t forget to also budget for costs of completion, which can range between 2% and 5% of the purchase price. This means that if you buy a home for $300,000, you can expect to pay between $6,000 and $15,000 in closing costs. Closing costs vary depending on the state, lender, and type of loan.

For all alternatives of residency status and/or purchase, know that we at The Chaves Group are able to provide all the necessary guidance for you and your family to achieve your dream through your own home.