The process of buying real estate in the United States really presents a number of difficulties for either natives or foreign citizens. But the reality is that many lenders are willing to provide home equity loans to all categories of residents and this is possible even without a positive credit history in the United States. However, a potential buyer should keep in mind that the requirements for issuing a home equity loan still largely depend on the resident status. Most borrowers tend to fall into one of the following groups:
- native Americans;
- permanent residents with a green card (Form I-551);
- non-permanent residents with a valid work visa (E1, E2, H1B, H2A, H2B, H3, L1 and G1-G4);
- foreign nationals whose primary residence is outside the United States.
As a rule, it is much easier to get a loan for those who enter the first two categories. Holders of a green card and a work visa are subject to almost the same rules and requirements as for US citizens. When issuing loans to foreigners residing outside the United States, the bank assumes increased risks, therefore, in order to compensate for them, it will most likely require a significant down payment.
In addition to banks, mortgages to foreigners can be issued by the Federal Housing Administration (FHA). However, in this case, the acquired property must be used as a primary residence. You will have to attach a valid social security number and a document confirming the right to work in the United States with the application. This means that the agency does not issue loans to those who plan to use real estate in the United States only from time to time.
Another alternative is Credit unions. These non-profit organizations usually offer very competitive home equity loans rates and may have special lending programs for green card holders and US visa holders. In this case, only members of such cooperatives can take out loans. Participation requires a high membership fee, but low rates on loans, if any, will be needed by their members. Often, such an association includes an entire organization with all its employees.
Professional advice: when choosing a bank, experts recommend contacting those institutions that are located in immigrant areas – they, as a rule, have more experience working with non-residents, and they can more effectively assist clients with alternative ways of confirming their financial reliability.
Bank requirements and home equity terms
In one of the largest US banks, HSBC, borrowers can get a loan of up to $ 3 million. The home equity loan repayment terms can be chosen between fixed and floating rates, which will determine not only the interest and amount of monthly payments, but also the loan term. So, with a floating rate, the repayment period will be 30 years, and the rate for using the loan starts from 4%. A mortgage with a fixed interest rate in HSBC can be taken for 15 or 30 years at a rate of 5% per annum. Thus, an apartment in Miami with an ocean view can be purchased for $ 230,000. With an initial payment of 20% ($ 46,000), a 30-year maturity and a rate of around 5%, monthly mortgage payments will be about $ 1,342. For more accurate data, you can go to the website of the selected bank, and use the mortgage calculator to calculate the potential costs.
Another giant of the home equity lending market, Citibank, is ready to provide a loan of up to $ 2 million, financing up to 70% of the value of real estate. In general, the process is simple: the higher the initial payment, the less risks the bank will include in the loan rate.
Large banks are ready to finance up to 75% of the appraised value of the acquired real estate – this is the official information for foreign borrowers published on the banks’ websites, but realtors say that in practice it is difficult for foreigners to get a loan even with an initial contribution to the amount of 50% of the residential property value.
Home equity lending process
Step 1. Applying for a loan and pre-approval. This step can greatly simplify the process of obtaining a loan in the United States. Banking consultants check the financial component of the borrower, determine the possible loan amount and interest rate.
Step 2. Credit check. At the request of the borrower, the consultants check the international credit history. Additional information may be required from the borrower to complete the credit check.
Step 3. Providing a package of documents. In different states, the list of documents may vary slightly, but, according to generally accepted practice, it is necessary to collect papers confirming the identity of the borrower, income, employment and the presence of assets.
Step 4. Execution of the transaction. During completing the transaction, the borrower signs legal documents, including those relating to the costs required to transfer ownership. At this stage, the borrower-buyer receives all the documentation and the keys to the new home.
Required set of documents
The main purpose of collecting documents is the need to prove to the credit institution that lending to the borrower carries a minimum of risks. For US citizens, this is not a big deal, as most of them have a credit history, a W-2 form, and tax returns that track income over several years. But everything becomes more difficult for someone who has not been in the country for a long time or does not live on its territory most of the time.
Standard package of documents for obtaining a loan
- Identity card: copy of an ID, US visa;
- If you own real estate, you must indicate the full address, attach an invoice for paying real estate tax, an invoice for paying for insurance;
- If the borrower rents a property, it is necessary to indicate the full address, attach a copy of the lease agreement indicating monthly payments, a letter from the property’s owner;
- Proof of employment: employer’s name, postal and legal address, phone number and email address of the employer or HR department;
- Financial documents: bank statements for the last two months.
- Depending on the type of home equity loan and the legislation of the state in which the purchased property is located, additional documents may be required, the list of which can be clarified by the broker.
Extra costs for lending
It is more convenient to consider a number of extra payments with a specific example, so let’s return to an apartment in Miami for $ 230,000. The initial payment (20%, $ 46,000) is made at our own expense, which means that the amount of the mortgage loan is $ 184,000.