Not a US Citizen? You Can Still Buy and Finance a Home

According to the National Association of Realtors, foreign nationals are reshaping the US real estate market in a big way. U.S. home purchasers by international buyers grew an astounding 54 percent between 2010 and 2012, topping out at 82.5 billion last year. This means sales to non-citizens aren't unusual, and they aren't particularly difficult. If you're a foreign national wishing to purchase and finance real estate in the US, there is a well-established path for you to do so.

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While 63% of foreign buyers paid cash (the NAR speculated that buyers unfamiliar with the American mortgage landscape might not know they can obtain financing), non-citizen buyers have access to many of the same programs that US buyers do, including FHA loans with 3.5% down payments. Fannie Mae and Freddie Mac also allow foreign purchases.

Foreign National Home Loans: Here's the Deal

Once you indicate on your mortgage application that you are not a US citizen, the lender is required to determine that you meet the requirements for home ownership in this country. In most cases, you'll need a valid Social Security number to qualify for financing. FHA makes exceptions for employees of the World Bank, foreign embassies, and other diplomatic folks. Your documentation requirements depend on your status:

  • Lawful Permanent Resident Aliens If you have lawful permanent resident alien status, you can buy a home in the U.S. with as little 3.5% down. You don't need a US credit rating to apply for a mortgage. FHA says you need to supply evidence of lawful permanent residency. That's documentation issued by the Bureau of Citizenship and Immigration Services (BCIS, formerly the Immigration and Naturalization Service) within the Department of Homeland Security.
    Fannie Mae Fannie Mae purchases and securitizes mortgages made to non–U.S. citizens who are lawful permanent or non-permanent residents of the United States under the same terms that are available to U.S. citizens. Fannie Mae does not specify the precise documentation the lender must obtain to verify that a non–U.S. citizen borrower is legally present in the United States. Fannie Mae and Freddie Mac do require that all borrowers have Social Security or Tax ID numbers.
  • Non-Permanent Resident Aliens As a non-permanent resident alien, you can get conventional (non-government) or FHA financing if the property will be your primary residence, you have a valid Social Security number and a satisfactory 2-year credit history, and you are eligible to work in the U.S. (evidenced by an Employment Authorization Document issued by BCIS).If your work authorization will expire within a year and you have a prior history of residency status renewal, you're good to go--lenders are required to assume that continuation will be granted. If there are no prior renewals, new home lenders have to determine the likelihood of renewal based on information from the BCIS.

What About Your Credit Score?

Many foreign nationals obtain Social Security numbers, but if there is very little on their credit reports (this is called a "thin file"), they may have no credit scores (it takes at least three trade lines to generate a credit score). That's okay -- mortgage lenders in the US can create a non-traditional credit report by getting your payment history from utility companies, landlords, and any other accounts which require regular payments. Even regular deposits to a savings account can be treated as a payment obligation for credit reporting purposes. This means it's even more important for foreigners than for U.S. citizens to be prompt with telephone, rent, gas and electricity payments, because they may be the key to mortgage approval. What you want to avoid is negative credit history, because derogatory information hurts a thin file a lot more than a well-established one. Lenders can't use non-traditional data to bring up a bad score.

Foreign Buyers Help the US Housing Recovery

U.S. real estate is more attractive to foreign buyers because compared to many other countries, it's relatively cheap. For US citizens with homes to sell, the demand created by foreign buyers could prove an important part of the housing recovery. The role US mortgage lenders play in financing these purchases is also critical.

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