Recently, the U.S real estate market has displayed a strong indication of recovery prompting many people to reconsider American property investments as a possibility, some of them being foreigners. In this article, I will discuss how to buy property in the U.S to help international homebuyers take advantage of the many benefits such as a weaker dollar and lower home prices.
Many countries do not allow its citizens to sell land to those without citizenship. So, you may be wondering whether it’s possible for you to purchase real estate in the United States. Fortunately, foreign investors can still buy property in the U.S. The only difference is that community associations such as homeowners associations, cooperatives, and condominium associations impose some laws and taxes to foreign investors.
So yes, the U.S. is a viable option for investing. Granted, there are still some challenges foreign investors will face when buying American property, so I have decided to offer these tips on how you can buy property in the United States.
Find the right people
The first step is to find the right professionals to guide you through the process, including an attorney and real estate agent. They should have an extensive experience in working with international homebuyers. The easiest way for you to locate a good agent is through referrals, through either word of mouth or recommendations from a reliable website.
Here is a useful video from Rick Otton on what you need in a real estate team, which is applicable to U.S. investing.
Getting a mortgage
When purchasing a property in the United States, most foreign buyers prefer paying cash because it is a much quicker and easier process. But if you do not have that large a capital to pay upfront, finding financing is still an option, especially with current mortgage rates so low. While not too many lenders in the U.S offer real estate loans for foreign buyers, it’s not an impossibility to secure financing. Getting a mortgage is just a matter of identifying the right lender.
Requirement to get a mortgage
Of course, the lending institutions will want to know their foreign applicants. So, the lender will conduct detailed reviews of your asset and income documentation.
First, you should expect to make a down payment of at least 30% of the value of the property. The lender will then ask you to provide documentation to show bank statements, sufficient income, and reference letters from credit institution as well as two forms of identification. Lending costs
You also need to establish a bank account in the U.S where you will deposit the down payment in order to get a mortgage. Although the interest rates for foreign borrowers are slightly higher than that of United States residents, you can get an annual interest rate ranging from 4.5% to about 6%. This is true since rates in the U.S are low nearly all times. Like U.S residents, the lender will charge you closing costs on mortgage such as third-party fees and lender fees, which are typically about 2% of the loan amount.
All lenders in the United States will require you to buy property insurance to protect it from any potential damage. The costs will vary depending on the state, the size of the home and the location’s susceptibility to natural disasters.
You must also consider the property tax before buying a property in the United States. The taxes vary depending on its location and value as well as the state and county. So be sure you get all these details right when consulting with your solicitor contact in the U.S. (which is why it’s crucial to build your team first!)