How can a foreigner get a mortgage in the USA?

In 2023, mortgages in the USA are characterized by low-interest rates and tolerant requirements for prospective borrowers. Therefore, investing in real estate located in this country can be very profitable. In this article, we will look at the main advantages of buying a home in the US for foreigners and how to set up the process. And make your American dream come true! So, how can a foreigner get a mortgage in the USA?

Loan for the housing purchase

Each resident of the United States takes out a real estate loan in proportion to their income from official work. At the beginning of 2023, the average mortgage for foreign citizens was approximately 100-150 thousand dollars.

As for the loan agreement terms, the client can choose the repayment period that suits him: from 15 to 30 years. Most borrowers prefer a longer period of use of money, pursuing the goal of reducing the monthly payment.

Mortgage lending in the USA requires a down payment. The average value of this indicator is 40% of the price of the loaned residential square meters. Some banks provide at least 50%, others 30% is enough. The final amount of the advance payment is a derivative of the financial reputation and solvency of the borrower.

There are other important conditions for obtaining a mortgage in the USA and its further maintenance:

The obligation to purchase insurance against unforeseen circumstances. In particular, the policy must cover the risks of fires, explosions, floods, and other natural disasters.
According to American law, the repayment of the long-term loan by the previously stipulated date in the contract is not accompanied by the imposition of fines.

How to get a mortgage loan in the USA for a foreigner

A foreigner who meets the following requirements has the right to receive a mortgage loan:

age — no younger than 25 and no older than 75
positive credit history
having a residence permit or green card/work visa
having a social security card

It is essential to consider that a mortgage in the USA for foreigners is issued subject to mandatory compliance with two conditions.

First, opening a current account in one of the American banks is necessary.
And, secondly, to place funds on it.

The topic of how to get a home loan in America would only be complete by mentioning the documents required by the bank. Their standard list looks like this:

original and copy of current foreign passport
completed application form
green card or work visa
bank statement, reflecting the movement of funds
a certificate of income received during the last 3 years (in dollars)
social insurance card number
certification about the quality of the credit history
a copy of the sales contract

To comply with the requirements, it is necessary to have all documents translated into English and certified in a notary’s office.

If you want to improve the likelihood of getting a house or apartment in the USA on credit, consider including a letter of recommendation from a reputable financial organization in your document package. Then the American bank will surely relax the requirements for the potential borrower and shorten the period for considering the application for receiving funds.

But in any case, the slightest inaccuracy in documents can lead to a refusal to issue a mortgage. Also, it would help if you did not count on giving a long-term loan to a foreigner with a tarnished credit history.

Refusal to receive bank funds may also be due to the borrower’s age. Some foreigners may not realize that when applying for a mortgage, they must remember that the loan agreement cannot extend beyond the borrower’s 75th birthday. This is an important factor to consider.

Types of mortgage interest rates in the US

There are two types of mortgage interest rates in America:

A fixed-Rate Mortgage (FRM) is stable throughout the loan agreement.
Adjustable-Rate Mortgage (ARM). It provides for adjusting the value in a larger direction after a certain time.

Additional costs

The calculations above did not consider the additional costs required for an American mortgage. Let’s briefly list them:

You will have to pay from 200 to 500 dollars to evaluate the purchased house/apartment, based on which the lending volume is determined. If the real estate object exceeds 100,000 dollars, the cost of this service is usually doubled. At the same time, the banks insist on the annual re-evaluation of the appraisal examination. That is, once a year, you must pay at least another 200 dollars.
The bank charges commissions for issuing a loan of 3-10% of its size.
Buying insurance will cost another 1-3% of the loan amount per year. But US financial institutions do not require the borrower to insure his life. In this case, we discuss policy coverage of risks associated exclusively with real estate purchased with borrowed funds.

Advice on obtaining a mortgage loan

If you’re planning on applying for a long-term home loan agreement in the USA, it’s important to take extra care in preparing your documents. For this, it is best to use the services of a broker who will collect a complete package of necessary papers. In America, every record is taken very seriously, and if there is even a seemingly insignificant error, the borrower will receive a refusal.

Do not try to issue a mortgage with the minimum number of documents. The desire to save time can turn into financial losses. After all, the interest rate increases with this approach. But in the case of providing an extended package of papers, money is issued at an interest rate that tends to be the minimum possible.

The list of additional costs when issuing a mortgage and their amount is different in each bank. Therefore, before signing the contract, it is necessary to find out all possible nuances from the financial institution employee. An offer from another bank may be more profitable.