U.S. real estate financing is one of the more difficult tasks for foreign investors interested in the residential U.S. real estate market. While the U.S. has a culture that is acclimated to personal debt – in 2018, the average amount of personal debt for Americans (not including mortgages) was $38,000 – it can be tricky for those living outside the States to find a lender and obtain everything they need for purchasing their investment properties.
Written exclusively for Expat Network by Hannah Frickers of Lendai
At Lendai, we want to help make financing as simple as possible by providing a step-by-step process for foreign investors to get started. This beginner’s guide will help you get started in your first U.S. real estate investment and provide you with many of the answers that you’ll need to get your first home loan:
The Differences In U.S. Home Financing
Every country has unique laws and regulations for foreign investors buying property within their borders. However, these are not the only differences you need to be aware of when trying to purchase your first U.S. property. Of course, the laws will be different, but so will the lending term norms.
For example, it is not uncommon for U.S. residents to obtain a 30-year fixed mortgage as opposed to a loan with a floating interest rate. If you are from Sweden or Canada, you may be used to fixed rates for three to five years, but this may not be advantageous for your U.S. investment. With the exception of first-time homebuyers who may opt for a floating rate if they expect increases in income over time, most Americans (and American lenders) choose a fixed rate to keep rental costs stable, especially if you are investing in a state like California where rent control exists.
If you are looking to invest in the U.S., it’s essential to assemble a team that can help you navigate legal and cultural differences in the U.S. real estate financing market.
Steps to Take to Secure U.S. Financing
Before you can begin the investment process in the U.S., you’ll need several items as well as a curated team to help you navigate the waters of the housing market. We suggest beginning with these three steps:
Speak with your tax advisor
If you are ready to invest in a U.S. property, talk to your financial advisor and legal counsel about the best way to structure your US investments and the potential r benefits of opening an LLC or other US entity as an investor. Once you have determined which option is best for your circumstances, you will need to work with an accountant to set this up and obtain a ITIN or EIN, depending on the structure you have chosen.
Establish a U.S. bank account
Whether you will own the property in your name or through a US entity, you will need a bank account in the US into which the rental income will be deposited. Most lenders will require a credit history in the U.S. before purchasing a home (unlike Lendai). If you do not already have a bank account and credit card in the country, you will need to obtain this six months in advance to establish a credit score.
Gather Other Documents for Your Lender
In addition to your ITIN or EIN, which is needed to purchase property legally, you’ll also need to gather the following information for your lender:
- A passport and driver’s license
- Bank statements from foreign accounts, and US accounts, if relevant.
- Proof of income (pay slips, tax returns as relevant)
- A credit report
Your U.S. Real Estate Investment Team
As a foreign and remote real estate investor, you’ll need several partners and services to ensure your first investment is a success. These five professionals can help you get started:
- A real estate agent with CIPS designation – A Certified International Property Specialist (CIPS) should be on your team to help you find the right properties and help you navigate the legal requirements of purchasing a home as a foreign investor.
- Real estate attorney – Some states require a buyer’s attorney, and even if you are not required, it’s a good idea to have someone with legal expertise to help you with the lending and closing process. A CIPS agent may have some knowledge, but they will not have the ability to give legal advice if you run into trouble.
- financial advisor – Purchasing property in the U.S. means you have an entirely separate U.S. financial portfolio. Hiring an advisor who is familiar with U.S. financing and investing can ensure you make the most out of your investments.
- Tax advisor – In addition to earning, you’ll also be paying U.S. taxes on your properties, which means you’ll want an experienced tax advisor by your side.
- A lender specializing in U.S. investing – Finding the right mortgage in the U.S. as a foreign investor can be tricky, so you should seek someone with experience and who specializes in U.S. investments, specifically for those outside the States.
This is where Lendai comes in. We offer unique financing products for those outside of the U.S. and ensure you receive the best deals in America’s hottest housing markets. So if you are ready to expand your portfolio to U.S. residential real estate and want to find out more about U.S. real estate financing talk to Lendai about your options and how to get started today.
The information contained in this post has been provided by Lend A.I. Ltd. (and/or its affiliates) for information purposes only, and as such, this post shall not be interpreted as legal, professional, or commercial advice. While every care has been taken to ensure that the content is useful and accurate, Lend A.I. (and/or its affiliates) gives no guarantees, undertaking or warranties in this regard, and does not accept any legal liability or responsibility for the content or the accuracy of the information so provided, or, for any loss or damage caused arising directly or indirectly in connection with reliance on the use of such information.