American mortgages and home loans: guide

American mortgages and home loans: guide

Home ownership is a dream for many in the US. Almost 65% of people have their own place. If you are planning to spend more than a few years in America, buying a property can be useful to you as well. Even if you do not live, study or work in the US, you may decide to buy a place as an investment or a holiday home. With such a variety of options, you will definitely attract attention in a place you love in the US.

 Whatever your reasons for buying a new home in the US, you need to know the type of mortgages available and the steps needed to get a facility. This hands-on guide will tell you which US banks offer mortgages and home loans to non-residents, what formalities you need to get your loan, what legal advice, and what costs.

 Mortgages in the US: What types of mortgages are there?

 The mortgage market in the US is very well-developed. However, the market has traditionally developed somewhat differently than in Europe. Therefore, you might find some products or terms that are unfamiliar if you are used to the system elsewhere.

In any case, you need to know a bit about how the different products work before you commit to a mortgage to make an informed decision.

 First, you have to decide if you want a fixed or variable rate product. Fixed rate mortgages guarantee that the same interest rate will be applied for the contract. In the US, until the subprime crisis, it was common to receive a fixed interest rate for the entire repayment period – up to 30 years. This is in contrast to Europe, where such favorable conditions would be offered only for a short time – usually up to five years. It’s more difficult these days, but it’s still possible to get along a fixed price in the US, but you have to meet strict criteria.

 Variable rate mortgages in the US could be termed Adjustable Rate Mortgages (ARMs). Unlike fixed rate products, they may cost more or less as interest rates change.

 An alternative is a hybrid product that has a fixed price for some years before resorting to a variable ARM product.

For example, these may be referred to as “3/1 ARM” or “5/1 ARM” meaning they have a fixed interest rate for three or five years before switching to adjustable rates.

 Different banks and brokers offer different products and not every customer can access all available loans. The rules and products available to expatriate buyers may vary depending on your status, as well as the rates and requirements for documentation, etc.

The information in this manual is intended as a starting point, but it is a good idea to contact a qualified financial advisor or Let a mortgage broker knowledgeable who can fully explain the options available to you.

 Should I go to a bank or use a broker?

In the US, it is quite possible to arrange a mortgage directly with the bank of your choice. In fact, around 90% of mortgages are now arranged directly with banks, rather than using a broker or broker.

 However, if you are not sure which product is best for you, it is advisable to consult a qualified mortgage broker. It may cost you but could be a good value in the end, as a mortgage broker will take steps to get to know your circumstances and recommend a particular product for you. However, if you speak directly to a bank and are not sure what to expect from your loan, you can take out a mortgage that will prove to be bad for your needs.

 What are the legal requirements for getting a mortgage as a foreigner in the US?

 Foreigners with or without residence can legally acquire real estate in the USA. As an exp, you can also apply for a mortgage, although this is much easier if you have a green card or a valid work visa. Although FHA mortgages, which require meager deposits, are available to expatriate expats, it is harder to obtain if you do not have this documentation.

 In any case, individual banks will set their own terms and you will find that as a foreign investor, you are offered slightly less favorable terms or higher interest rates.

 How do I get a mortgage as a foreigner in the US?

 The possibilities of obtaining a mortgage in the United States vary from state to state as different lenders operate in different areas. Wherever you are, your application will undergo a series of checks to ensure that you can afford the loan, and you will generally be asked to pay a relatively high deposit. Offers vary, so it’s worth talking to a few brokers or banks to see what offers they can offer.

 Paperwork (documentation)

The exact documents you need depend on the bank you are using. However, you can expect to be asked the following questions:

  1. Copies of your ID documents (passport)

  2. Proof of legal stay in the USA

  3. Documents proving creditworthiness (usually an international credit check, bank statements, salary statements, the last three years of tax returns or a letter from your employer)

  4. Documents proving the affordability of the mortgage (these may be budgetary conditions, household bills or account statements showing that you can afford the monthly payments)

Affordability is a deciding factor in whether you are offered a loan or not. Expect a maximum debt ratio of around 35% to show that you can afford to repay the mortgage, even if your circumstances change. Sometimes proving your creditworthiness is difficult if you have not been to America for long. In that case, you may be able to obtain an international credit check to verify your records elsewhere.

 All of the above documents should be made available to the bank to obtain a mortgage or mortgage prior approval,  think they will agree on how much it would give you if you find a suitable property.

 The step by step guide to getting a mortgage in the USA

To get a mortgage in the USA, you generally need to do the following: 
  1. Decide if you want to use a broker to investigate your options for an American mortgage

  2. Choose a mortgage that suits your needs

  3. Hand over the requested documents and seek approval for the mortgage

  4. Find property in your budget and agree on a purchase price with the seller

  5. Order a house inspection to check the quality and condition of the property

  6. Pay your down payment to secure the sale and arrange a completion date

  7. Once the surveys are completed, you can complete the sale. You take ownership of the property and are liable for the mortgage payments and any additional taxes fees

 If you are mortgaging in the United States, you will pay fees such as administration fees and legal fees. The exact cost depends on the circumstances. But adding everything together is a costly transaction. Normally the fees are called closing fees and are summarized in an invoice called HUD-1.

 Carefully review the details as some fees are negotiable or should only be used under certain circumstances. It is not unsurpassed that brokers bill the bill for unnecessary services.

 When arranging a mortgage, you can also pay the following fees in the United States:

  • Application Fees            20 – 50 US Dollars

  • Rating fees                      $ 300 to $ 500

  • Billing fees up to           300 USD

  • Title fees and title insurance (variable)

  • Recording fees              $ 50 – $ 150

 Mortgage Guarantee Fee based on the product chosen is usually 2% or 3% of the value

Depending on the situation, you may find that other costs are incurred, both in terms of taxes and the cost of arranging the loan.

 In most cases, you will need to run a local American bank account to qualify for a home loan. If your main account is outside the United States, you may need to send money from abroad to pay fees and incidentals. If this is the case, it is important to look at what you are charged for an international money transfer. You will probably find that your home bank does not offer you the best deal. Even if you claim to offer toll-free transfers, you can be sure your cut will be extrapolated to a bad exchange rate.

 A better option is to use a specialized service such as TransferWise. You can transfer cash at the exchange rate you find on Google for a small, transparent fee. Alternatively, you can hold cash in one of 15 different currencies in a transfer less Borderless account, so you can immediately switch to your broker or seller once you have completed the deal in your new home.

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