American mortgages and home loans: A foreigner’s guide

American mortgages and home loans: A foreigner's guideOne of the most attractive for work and living countries of the world is the United States of America. Is it possible to settle here for a visitor, get a loan to buy a home, a car and start your own business?

Own home or apartment are one of the basic goals of any family. However, most people can not afford to buy housing without involving banks or other financial institutions.

The United States of America is one of the most profitable countries in the world for obtaining a mortgage loan. The local population is absolutely normal to “life in debt”, as interest rates for any type of credit are minimal.

What you need to do if you want to buy a house in the USA

Having made a decision to buy a house, but not being able to pay all of its value immediately, you need to contact the bank. Target loan for the purchase of real estate is issued on the security of this property. The status of the house in this case will be publicly disclosed in specialized publications and included in the register of rights to real estate. In fact, such a house will belong to the bank or financial institution that provided the loan, until the payment of the entire amount and interest.

The average cost of a house with 2-3 bedrooms in the US varies from 70,000 to 400,000 dollars, depending on the staff and the material from which it is built (stone and brick for 20-30% more expensive than wood and frame). For an ordinary citizen, this amount seems quite real, but most people do not want to immediately part with most of their savings or begin to rigidly save on life.

Therefore, they prefer a mortgage for a period of 10, 15 and 30 years. Such a payment regime allows you not to worry about monthly payments, since they make up 10 to 20% of the family income. Of course, in this case, the cost of home for the borrower increases and as a result, the original 100,000 dollars will have to be given twice as much after 30 years.

However, there are several nuances that allow US citizens to pay smaller amounts:

  • high competition with banks and other financial institutions that provide loans, gives a chance to get quite favorable lending conditions, bonuses for interest payments on time, etc .;
  • banks’ loyalty to early repayment of loans;
  • an opportunity to get a preferential mortgage for veterans, disabled people, victims of various natural disasters, representatives of some groups of professions, etc .;
  • Banks willingly give money to buy both housing on the secondary market, and on the primary. There is no risk that the house under construction will not be completed or put into operation on time, as the state takes an active part in insurance of such projects;
  • the opportunity to take a loan in another bank on more favorable terms for early repayment of the mortgage (refinancing).

Types of mortgage lending in the US

There are two main types of mortgage – with a fixed and variable rate. The fixed rate is always higher than floating rate, but it is less risky for long-term crediting, since you will always pay the same amount.

The floating rate is usually 30-40% lower, but it is tightly tied to the economic situation in the country, stock markets and exchange rates, so it can only be profitable for short-term loans or early repayment.

Mortgage for foreigners in the US

Citizens of foreign countries, US banks also provide loans, but under more stringent conditions. So, if a US citizen signs up a loan, then the initial payment for it is minimal (about 10% of the total amount) or is not required at all. The foreigner will have to lay out immediately up to 30-40% of the total. Agree, this is essential.

If for local people the average interest rate is from 2.85 to 4.5%, then foreigners are granted a loan of 7-10%. Also the procedure itself will take much longer and more difficult. For example, you will need a letter of recommendation from your bank in your home country and details of the account opened no later than two years ago. There should be an amount of 12 of your monthly income.

You also need a bank account in the US with the amount of the down payment, the amount of insurance and the reserve, which is equal to at least 12 monthly mortgage payments and the full cost of credit processing services. On average, in the presence of an open working or other US visa, the credit for foreigners is at least 45 days.

Picture Credit: nattanan23

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