The United States is the third-largest country in the world, with a vast diversity of cultures and climates. There is truly something for everyone—one of the biggest reasons to purchase property in the country.
This is true whether you are looking to purchase a home in the US as a residence, or as an investment property. But without US citizenship, the process of obtaining expat mortgages to purchase property may seem daunting.
Especially after the 2008 crash of the mortgage industry, obtaining a home loan in the United States is not exactly a piece of cake. Plus, in the midst of the COVID-19 pandemic, mortgages have become a hot-button issue.
This is all especially true for expat mortgages—for those non-US citizens looking to borrow funds for a home purchase.
Luckily—it doesn’t have to be. There are opportunities for foreign expats to obtain home loans in the United States. Exact terms depend on many factors, including desired location and current residency status.
Keep reading below for more information on expat mortgages in the United States, and how you may be able to make this dream a reality for yourself.
What Is an Expat Mortgage?
Expat mortgages are exactly what they sound like—programs allowing non-US citizens to obtain home purchase loans. Ordinarily, there are several barriers that would make the traditional mortgage process difficult.
Think of a mortgage as a gamble, for the lender. They are taking a chance on a borrower by providing a large sum of cash to be used for the purchase of real estate.
Given the nature of the lending relationship and just how large the sum of funds may be, they must do their due diligence to ensure you are likely to pay the mortgage back. In turn, they will hold enough capital to then loan out a mortgage to the next borrower.
But without being a US citizen, the waters become significantly murkier. You are much more likely to default on your loan and find a quick escape back to your home country where the lender has little recourse to recoup the funds.
Of course, this does not mean that every foreign borrower will fail to repay their mortgage. It just illustrates the significant risk facing these borrowers, and why they must structure their lending practices accordingly.
But with the help of an expert mortgage broker for international applicants, there are various options available. Again, exact programs and eligibility will vary based on location and citizenship status.
Who Qualifies for Expat Mortgages?
Eligibility for expat mortgages depends largely on your American residency status. Although, both non-permanent residents and foreign nationals can still obtain these loans, there are various additional measures required.
Generally speaking, those with a green card or valid work visa will find a much easier time of obtaining a mortgage. Furthermore, expat mortgage options will vary between states.
The main barrier that expats may run into when applying for a mortgage is proof of reliability as a borrower. Without substantial financial dealings with either American or major global banks, there is not always a sufficient record to demonstrate creditworthiness.
But with the prevalence of large international banks, this may not always pose such a heavy burden.
Overall, eligibility truly depends on your unique circumstances. To get a better idea of your prospects for obtaining a home loan as an expat in the US, it’s important to seek out a professional.
A non-resident mortgage USA specialist can help outline your available options—and which path may be most successful in obtaining an American home loan.
Applying for a Mortgage With a Valid Work Visa
For those currently living in the US with a valid work visa, there are more straightforward approaches available. The US Federal Housing Administration (FHA) does accept applications for mortgages from non-residents on a work visa.
This loan is government-backed and uses the same terms as given to American-citizen applicants.
Work visas must fall under one of the following categories:
- Other H series visas (H-1C, H-2, H-3, H-4)
- E series
- G series
- L series
- O series
- NATO series
- Canadian and Mexican NAFTA series
Expats currently living in the US under a work visa have a step ahead in the process that makes FHA mortgages possible—a Social Security Number. This would need to be provided when applying for the loan, in addition to your Employment Authorization Document. This is also known by its colloquial term—your work permit.
Supplying your work permit serves as proof that you plan to reside and work in the US for at least three years ahead. This way, they can feel confident that you intend to repay your loan and will not default and move back to your home country.
This can also be confirmed with a letter of intent from your employer, demonstrating your contract with them and intent to renew should be close to expiration.
Furthermore, lenders will need financial records to demonstrate creditworthiness. This can include:
- Back-dated statements
- At least two years of tax returns
- Other credit history documentation
- Generally, this credit history must pertain to US finances. But on occasion, lenders may accept credit history from a home country with similar credit practices—like the UK or Canada
Applying for a Mortgage Without a Valid Work Visa
Without the aforementioned work visa or green card, foreign real estate buyers in the US generally cannot qualify for Fannie Mae or Freddie Mac loans. These giants either own or guarantee a vast majority of American mortgages.
These companies often purchase mortgages on the secondary market. This means they buy the loan directly from the mortgage lender—thus enabling that lender to raise capital to purchase more loans.
But since Fannie Mae and Freddie Mac generally will not purchase non-US citizen loans that do not fit under these categories, it poses an issue for the original lender.
Furthermore, it is much more difficult for lenders to feel confident with foreign expat mortgages when a more binding residency permit (like a work permit) is absent. This is because it is more difficult for the lender to track down a borrower overseas, should they default on their loan.
When mortgages are available for these borrowers, they often do not align with conventional loan terms. Instead, these non-conforming loans will carry their own underwriting structure. Oftentimes, this entails higher interest rates than with a conventional mortgage.
Plus, a larger down payment is often required to help offset the higher credit risk. On average, this down payment requirement tends to be 30 percent or higher of the sale price.
Even with all of the above information provided—and funds readily available for purchase—the approval process can be much different than a conventional, American-citizen mortgage.
This is especially true if you are missing financial documents or creditworthiness proof from an American financial institution. As previously touched upon, documentation from large global banks can sometimes still suffice. But this will depend on your unique circumstances, home country, and lender.
Once all of your ducks are in a row, it’s time to wait. The approval process typically takes much longer than would be seen with a conventional mortgage.
You may see a faster and more streamlined approval process when applying for a mortgage at an international lender, that has a presence in your home country. This may also serve to reduce the interest rate, as you may be considered a less risky borrower.
But again—each individual situation is different, and thus requires a careful review of all potential options.
Things to Watch Out for
While expat mortgages are certainly an option for many, there are important considerations to take into account.
One example is the taxes and fees associated with the purchase and maintenance of a home. This may vary between states and regions of the US. But generally speaking, these fees may present a stark contrast to what may be the norm in your home country.
One illustration could be the monthly fees for condos, apartments, and homeowners’ associations. Even if you own your property outright, you may still be responsible for a monthly fee that goes towards maintenance and other costs of the community. These fees can sometimes reach hundreds of dollars per month.
Furthermore, property taxes are something to take into consideration. Tax rates vary by state and by locality—but can reach up to 2.42 percent in some states. This does not include local taxes, either.
Again, different home countries will produce different results. Tax treaties between home countries and the United States can influence your tax liability when residing in the country.
This also does not cover income, should you be working and earning a salary in the United States. But these are all important factors to research and investigate before making a purchase.
You also must consider future fees, should you decide to sell your property down the line. Foreign citizens are required to have their final purchase price subject to a 15 percent withholding by the IRS. If you fail to do this, you may be levied additional taxes later on.
Plus, foreign expats are still required to pay the same capital gains taxes that American citizens pay when selling real estate.
There are other non-financial factors to review, as well. For example—those with full diplomatic immunity cannot qualify for a mortgage in the US. This is because those individuals are not subject to US law, and thus pose a large risk for default.
It’s important to stay well-informed of these items, as not to fall victim to an onslaught of unexpected costs. This will only raise a higher barrier to homeownership in the United States.
How to Find the Best Expat Mortgage Brokers
Despite these hurdles, using a mortgage to purchase property in the United States remains a very popular option for foreign nationals. Paying cash outright for a home may not be a viable option—but this does not have to preclude the dream of owning property in the country.
It certainly requires additional research and the help of a qualified professional. But in the end, it is worth it to achieve the goal of homeownership in the United States.
By now, it must be clear how confusing and convoluted the process can be. Applying for expat mortgages can be painstaking if you are unfamiliar with the process.
For this reason, it is critical that you seek out the help of a professional. Luckily, there are qualified foreign mortgage experts standing by to assist you!
But with that said, not all mortgage brokers are created equal. Your chosen option should be well-qualified, with years of experience in the industry.
This way, they can employ their skills and experience to help you navigate the complex mortgage system. This includes help at every step of the way—including the paperwork, background and credit checks, and proof of funds requirements.
Consider a US Expat Mortgage for Yourself
Hiring a trusted broker for foreign expat mortgages can smooth out the entire process, and ensure you are taking the best path ahead for your unique situation.
In Colorado and beyond, Fairway Mortgage is here to help. Our team of dedicated experts has years of experience in the mortgage industry, and how to navigate the mortgage system with respect to each clients’ goals.
We are dedicated to the needs of our customers and want to make your American homeownership dreams a reality.
For more information on expat mortgages, and how we can help you in this pursuit—contact us today!