Can foreigners buy and finance a house in the U.S.?
By: investUSA360 •
Buying property is a huge consideration for most of us but when we choose to invest abroad the stakes become higher and it can sometimes seem as though there is a multitude of information to wade through and no central point of reference.
One of the first considerations is perhaps whether the law permits you to buy in the country of your choice. This is understandable because in some countries you must first qualify as a resident in that country before you can buy a house there.
However, there are no limitations to foreign citizens buying property in the U.S.A. So, if you're planning to buy a holiday home there you will not face any restrictions. In the UK for instance the standard procedure would be to approach an estate agent when looking for a home to buy. In the U.S. you would find a Realtor to represent you as a buyer. They are licensed professionals who will search for properties on your behalf and represent you to the buyer. In effect, they are working for you and once selected you should sign a Buyer's Agency Agreement. It is not a requirement to use a Realtor but it is in your best interests to do so and you should ensure that they are members of the National Association of Realtors (NAR) - a regulatory body. If you know of someone who has purchased a property in the U.S. then it's a good idea to ask them if they would recommend their Realtor. Failing that, refer to the website realtor.com, where you will find listings of Realtors in the location you are searching in. One of the advantages to the buyer is that the Realtor's fees are paid by the seller, which means that it is of no cost to you.
Your Realtor will usually require proof that you have funding in place before they act on your behalf and provided you meet the affordability criteria it is also possible to apply for a mortgage with a U.S. lender. As in your home country you should expect to provide evidence such as bank statements, employer references and mortgage statements, if applicable. Before deciding this is the best financial option for you, you need to chew over the facts as there are repercussions of borrowing in a foreign currency. Remember that the exchange rate can vary, so if your mortgage is with a U.S. lender then the fluctuations would affect your repayments making them higher or lower each month. As a result of Brexit sterling has plummeted recently and UK citizens with foreign investments will be feeling the pinch so be sure to take into account the highs as well as the lows.
If the exchange rate is not too favorable in the present climate or if you want repayments that are largely consistent for the duration, then it may be worth considering borrowing from a lender in your country of residence. It would most certainly be the popular high street banks that you'd have to approach and they are only likely to offer you a mortgage in countries where they have offices so the U.S.A. should not be at all problematic.
Some of the misconceptions that exist around buying property in the U.S.A. evolve around green cards and residency. So, let's dispel some myths. Firstly, you do not require a Green Card to purchase a home there as a UK resident. Secondly, and unfortunately for those who desire it, there is no visa that results in a Green Card based on the fact that you have purchased a home there. It is true that under the federal program a foreigner who invests at least$500,000 in a project that will create at least ten jobs can apply for a Green Card. Some have chosen to invest in real estate projects but this is not synonymous with buying a holiday home and in most cases the latter would never result in the creation of ten jobs.
The tax system in the U.S. can be complicated but put simply, as a non-resident you will be liable to pay income tax on your U.S. sourced income and this varies from state to state. To complicate things further, there are seven states that do not levy tax on U.S. based income and these states are Alaska, Florida, Nevada, South Dakota, Texas, Washington State and Wyoming.
Whilst it all may seem like plain sailing, and it can be, you need to look further down the line and envisage what the future may hold. For instance, if you decide to sell it could cost you slightly more in taxes and fees than it would if you were a resident and again, this can vary from state to state.
All things considered, buying a home abroad can be a pretty nifty move - you get to own your own vacation home and there is the potential to earn an income from holiday lets. To ensure the odds are stacked in your favor, do your research, consider long term financial implications and seek out recommendations.
By Abigail Reid
investment, real estate, property in the US