Things International Homebuyers Should Be Aware of Before Buying
Many people want to move abroad someday but making that a reality can be tricky. For those looking to move to the United States, here at LendUS, we are happy to help. Not only will our Loan Advisors be able to help you secure funding, but we have developed a guide to illustrate how the process will be different for international homebuyers. From taxes to purchasing remotely to finding listings, this home purchase will not be an average experience.
Finding a Listing and Purchasing Remotely
The process of remotely hunting and purchasing a home was a scarcely used option by prospective homebuyers until the Coronavirus pandemic. Now many people are well versed in the process. You can be anywhere in the world and have someone on your behalf settle the home agreement for you. There are some key points to remember when embarking on this journey. Make sure you have a real estate agent you like and trust. You’ll be relying on him or her more than other clients would. Research to make sure you find the right person to help you. Find out their experience, schedule, and the part of the market they usually deal with. If you’re looking for a high-rise apartment, don’t get a real estate agent who isn’t as well versed in those properties. The process may take longer than a typical in-country transaction since there are many hurdles to overcome.
How to Finance the Purchase
Because international homebuyers aren’t typically citizens of the United States, it means they’ll most likely have to provide extra documentation to support their purchase. To prove you have a good credit score, enough funding, and are a reliable person to loan to, you’ll have to go the extra mile. In the United States, the Federal National Mortgage Association, commonly known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, also known as Freddie Mac, do not guarantee loans for non-U.S. citizens. This restriction means international homebuyers have to get conventional loans instead which could be more expensive. Larger banks will offer international buyers non-conforming loans, usually at a higher interest rate. Not only could the loan be more costly, but the upfront down payment might be 30% or more since you could be a credit risk just by being international. If you have a Green Card, that could help give you more loan options and speed up the process along, but usually, the process takes longer than an average home purchase. Because of these hurdles, 39% of international homebuyers opted to pay in cash between April 2019 and March 2020, according to the National Association of Realtors (NAR).
How to Pay Taxes
People worldwide are at liberty to purchase property in the United States, but there are still taxes that need to be paid. Depending on the status of their property, there are many ways foreign homeowners can be taxed. Suppose the property is to be a rental. In that case, that money can be taxable income that the homeowner can pay either annually, like most Americans, or withhold 30% of their gross payments received. If you want to buy and flip homes, that money is also taxable thanks to the Foreign Investment Real Property Tax Act (FIRPTA). A property’s taxes change depending on how it is owned, such as individually, by an American corporation, or a foreign corporation. To learn more about the different levels of taxation, visit Global Expat Advisors.
There are many factors to consider when purchasing a home in the United States as a foreigner. If you would like to learn more, make sure to contact one of our Loan Advisors for more information.