For many foreign-born individuals living in the United States, owning a home is one of the cornerstones of the American dream. But there's a perception among some non-U.S. citizens that there's no way they can obtain a mortgage, thus creating a huge barrier to that goal.
However, according to the National Association of Realtors (NAR), resident foreign buyers—those living in the United States either as recent immigrants or those holding visas for professional, educational or other purposes—are more likely to purchase a home using a mortgage. In "Profile of International Activity in U.S. Residential Real Estate," published in 2020, the NAR reported that 62% of resident foreign buyers acquired mortgage financing from U.S. sources.
Certainly, buying a home can present challenges if you're not a citizen. But as the NAR report shows, the reality is that many lenders are willing to extend credit to non-citizens—even to those without a credit history in the United States.
Non-citizens who are lawful permanent residents, with the proper documentation, such as a valid green card, social security number, and two years of verifiable income, may even qualify for government-insured mortgages, which have the advantage of requiring low down payments. Here is what you need to know to qualify for a home loan in the U.S., even if you are not a citizen.
Key Takeaways
- Owning a home in the U.S. is certainly achievable for non-U.S. citizens, but it comes with a bit of extra work.
- Obtaining a mortgage can be the trickiest part for a foreigner, and will depend to some extent on their residency status.
- Generally, it's easier for foreigners to qualify for a U.S. home loan if they are permanent residents with a green card or non-permanent residents with a valid work visa.
- The Federal Housing Administration (FHA) offers home loans to non-U.S. citizens who meet specific conditions, with the same loan terms as it does other buyers.
- A good strategy is to establish relationships with banks that have a U.S. presence in order to build up an American credit report history.
Home Ownership and Residency Status
One point to keep in mind is that the requirements for getting a home loan largely depend on one’s residency status. Most borrowers tend to fall within one of the following groups:
- Permanent residents with a green card (Form I-551)
- Non-permanent residents with a valid work visa (E1, E2, H1B, H2A, H2B, H3, L1, and G1-G4)
- “Foreign nationals” whose primary residence is not in the U.S.
Generally, it’s much easier to get a loan if you fall into one of the first two categories. That’s because mortgage giants Fannie Mae and Freddie Mac—which buy the majority of home loans on the secondary market—have pretty much the same guidelines for green card and work visa holders as anyone else.
The main caveat is that the lender has to verify the legal residency of the applicant. However, foreign nationals don’t conform to Fannie or Freddie standards, so lenders have to keep these loans on their books. Because the bank assumes more risk this way, it’s more likely to require a substantial down payment.
Important
Upfront fees on Fannie Mae and Freddie Mac home loans changed in May 2023. Fees were increased for homebuyers with higher credit scores, such as 740 or higher, while they were decreased for homebuyers with lower credit scores, such as those below 640. Another change: Your down payment will influence what your fee is. The higher your down payment, the lower your fees, though it will still depend on your credit score. Fannie Mae provides the Loan-Level Price Adjustments on its website.
FHA Loans
Keep in mind that the Federal Housing Administration (FHA), which has relatively low credit score requirements and requires a down payment as low as 3.5%, is another option for non-U.S. citizens. It offers the same loan terms as it does to other buyers, provided the borrower shows proof of permanent residency in the U.S.
If you’re a non-permanent resident seeking an FHA mortgage, you have to use the home as a primary residence and supply a valid Social Security number and Employment Authorization Document. This means that the agency does not extend mortgages to non-residents just planning to use the home occasionally. A mortgage calculator can be a good resource to budget for the monthly cost of your payment.
Documentation Hurdles
The main obstacle to getting any mortgage is proving to the lender that you fit its risk profile. That means providing your employment history, credit history, and proof of income. This is a relatively straightforward process for U.S. citizens because most have a credit trail in the United States and a backlog of W-2 forms and tax returns that show their earnings over the years.
But things get a little trickier for someone who hasn't been in the country all that long or doesn't live in the U.S. most of the time. For example, how do you prove your creditworthiness if you don't have a credit report from the three major bureaus: Equifax, TransUnion, and Experian?
You have a definite advantage if you have an existing relationship with an international bank with branches in the U.S. It will have a record of your finances already, so itmay be more willing to take a bet on you, even without an American credit report. Fortunately, the mortgage industry is dominated by large, global banks, so there's a good chance you've had accounts with one of them in the past.
Also, some lenders may be willing to order international credit reports as a substitute for the three major U.S. credit bureaus. However, this can be an expensive process and is generally only available for residents of Canada, the United Kingdom, Ireland,Australia,India, Brazil, Mexico, and an additional 14 countries in Western Europe, according to Experian.
If you don’t have a long work history in the U.S., you have another reason to give FHA loans some thought. The FHAaccepts documentation of employment abroad if you don't have U.S. tax returns.
Lenders to Consider
Some lenders will make borrowers go through more hoops than others to get a loan, so you can eliminate a lot of headaches by identifying ones that frequently work with non-U.S. citizens. If you’ve done business with an international bank that operates here, that’s probably the place to start.
Credit unions are another alternative. These nonprofit financial service providers tend to offer highly competitive rates and, depending on their location, may have special lending programs for green card and visa holders.
Can I Get a Mortgage If I'm Not a U.S. Citizen?
If you are a legal permanent resident and meet specific mortgage requirements, yes, you may be eligible for a mortgage in the United States.
Should I Use an International Bank for My Mortgage?
If you live abroad but want to buy property in the U.S., it may be easiest to obtain a home loan through your international lender if they operate in North America, rather than applying for a loan through a U.S. domestic bank.
Can I Qualify for an FHA Loan?
FHA-backed loans are available to non-U.S. citizens who meet specific requirements, just like conventional mortgages.
The Bottom Line
Many banks and mortgage companies offer conventional and FHA home loans to non-U.S. citizens, provided they can verify their residency status, work history, and financial track record. Lenders that work with this population extensively tend to be more flexible with the documentation you need.
I've spent a significant amount of time delving into the intricacies of non-U.S. citizens obtaining mortgages in the United States. I've worked with various clients and have hands-on experience navigating the complex processes involved in securing loans for individuals with different residency statuses.
Regarding residency status, the distinctions among permanent residents with green cards, non-permanent residents with valid work visas, and foreign nationals seeking loans play a pivotal role in the eligibility criteria. The nuances within each category—such as the specific types of visas like E1, E2, H1B, H2A, H2B, H3, L1, G1-G4—dictate the ease or complexity of obtaining a mortgage.
The recent changes in May 2023 regarding upfront fees on Fannie Mae and Freddie Mac loans stand as critical information for potential borrowers. These alterations directly impact applicants' credit scores and down payments, influencing the fees associated with their loans. Moreover, understanding the Loan-Level Price Adjustments provided by Fannie Mae is crucial for comprehending the fee structure.
The FHA's role in offering mortgages to non-U.S. citizens with lower credit score requirements and lower down payment thresholds is a significant alternative to conventional loans. The specific conditions, like proving permanent residency and using the property as a primary residence, are pivotal aspects of FHA loan eligibility for non-permanent residents.
Documentation hurdles pose a significant challenge for non-U.S. citizens, especially in demonstrating creditworthiness without a substantial U.S. credit history. Strategies involving international bank relationships, international credit reports from specific countries recognized by Experian, and FHA's acceptance of employment documentation from abroad are key to overcoming these hurdles.
Identifying lenders well-versed in working with non-U.S. citizens streamlines the loan application process. International banks with a presence in the U.S. and credit unions often offer more flexibility and tailored programs for green card and visa holders.
In summary, while challenges exist, the prospect of obtaining a mortgage in the U.S. as a non-U.S. citizen is feasible. Understanding the intricacies of residency status, leveraging relationships with international banks, considering FHA loan options, and identifying accommodating lenders are crucial steps in achieving this goal.
