A Guide to Buying Property in The USA as a Foreigner

A guide to buying property in the USA

Below, we’ve highlighted 7 key steps in buying property in the USA.

Content

• 7 Steps to purchasing property in the USA
• Step 1 – Decisions
• Step 2 – Tax number
• Step 3 – Bank account
• Step 4 – Mortgage
• Step 5 – Search
• Step 6 – Agent
• Step 7 – Finalize
• Begin your search of property for sale in the USA
• Common questions
• Infographic

Step 1: Decisions

Prior to beginning your property search, a simple step is considering whether it will suit your lifestyle to up your roots and move to the USA.

In order to test the waters, you could take a short holiday in the general location you intend to relocate to.

Conversely, if you are taking a contractor role in the USA, you could consider renting to begin with. The last thing you want is to have gone through all the stages of moving home and realizing further down the line that you don’t feel at home or wish you’d never have moved.

Further to this, you should have an idea of how the property will be used;

Will you live in the property, rent the property to others long term or as a vacation home, or will the property be used as a commercial premises?; The location, size and price of the property will be dependent on the final use of the property.

Step 2: Tax Number

While US citizenship or a green card is not a requirement when purchasing property in the United States of America, you are required to have an individual taxpayer identification number (ITIN).

An ITIN is issued by the Internal Revenue Service for tax return purposes. It is for non-US nationals who do not have and/or are not eligible for, a social security number.

Step 3: Bank Account

In order to buy a house in the USA, it is highly likely that you will be required to open a US bank account.

This should be done as early as possible, as the provider who issues your mortgage may require at least 3 months of bank statements.

It is also a requirement by the majority of mortgage lenders that you have a US bank account.

Many banks in the USA will also require that you meet a minimum deposit amount – usually $100,000 and over, with some requiring at least $1m to be deposited.

It should be noted, there are limited options when transferring money from your current account to an American bank account.

There will also be a fee associated with the transfer, so ensure you are familiar with your available options.

We would recommend using a foreign exchange company that specializes in transfers to the USA, as you’re likely to obtain the best rates through this route.

Step 4: Mortgage & Financing

There are many options available to you when obtaining a mortgage – A large proportion of property purchases in the USA are done so by using a mortgage.

You should choose the mortgage with rates which best suit your current available income, be it a interest only, fixed rate, variable rate or repayment mortgage.

When obtaining a mortgage, there are much stricter procedures which are followed by lenders compared to pre-08.

As stated above, you may be required to provide mortgage lenders with proof of your bank transactions from the past 3 months.

Your past 3 months bank statements along with your credit rating and tax returns will be used by mortgage lenders to determine your affordability – For example, if your annual income minus taxes and other expenditure leaves you with $10,000 spare, a lender will usually not issue a mortgage which costs close to this amount.

Pre-qualifying for a mortgage is a recommended step when purchasing property in the USA.

Essentially, you will find a suitable lender that fits your requirements of property value, fees, deposit amount, monthly payback, etc and contact them for a pre-qualifying mortgage.

A pre-qualifying mortgage will usually last a number of months, which allows you to find a property knowing that you have financing sorted and can complete on a property quickly and efficiently.

Step 5: Search

buying a property in usa as foreigner The next step in buying a property in the USA is to search for your ideal home.

Prior to searching for a selection of possible properties, ideally, you should have a good idea of where you intend to move – State, City, neighborhood. If you know which city you’d like to move to, a realtor local to that area could provide you with valuable information on the best places to live.

When searching online, you should narrow your search to only include properties that fit your budget, location, size and type.

Step 6: Agent

Unlike in the UK, it is more common to purchase a property in America rather than renting.

For this reason, a large number of estate agents specialize property sales and will thus have a thorough knowledge of the local prices and market trends.

When determining which agent you should appoint to help in buying a property, ensure that they are CIPS qualified and be sure to ask them plenty of questions to find out who will be most qualified in assisting you with your move.

It is also recommended to sign a buyer agency agreement with your chosen agent, as this will ensure they represent you completely and not the seller.

Fees when buying a property in America are around 6% of the purchase price and are paid by the seller. In the majority of cases, the selling and buying agents split the fees 50/50.

Step 7: Finalize

Once you have a ITIN, an American bank account, are pre-qualified for a mortgage, found your ideal property and have (not required if preferred) appointed a buying agent, it is time to finalize and complete on the property.

Appointing a buying agent for the process will be beneficial during this stage of the buying process as they will be well aware of all the paperwork required to complete on the contract of a property.

Now that you have finalized on the property, it is time for possibly the most stressful (to some) stage of purchasing a house in the USA – Moving in! Or, if you’re opening a commercial property, moving in AND beginning with the initial start up of the business.

Common Questions When Buying Property in The USA as a Foreigner

Can I Buy a House in The USA as a Non-Resident?

Yes, you do not have to hold American citizenship to purchase property in the USA.

Is There Stamp Duty in The US?

In the USA, the term “Stamp Duty” is not used during a property transaction. A term which covers all costs, taxes and fees is known as “Closing Costs”.

In general, closing costs will range between 1.5-2.5% of the purchase price without a mortgage and 5-7% with a mortgage. Closing costs compromise of mortgage tax, title insurance, mansion tax, government fees and fees from agents, banks and attourneys.

How Much Does it Cost to Buy a House in The USA?

As mentioned above, purchasing a property in the USA will compromise of the purchase price + fees and taxes of between 1.5-7% of the purchase price.

How Long Does it Take to Buy a House in The USA?

The time it takes to buy a house in the USA can vary greatly depending on how long you take shopping for your ideal house. In general, it takes between 2 weeks and 2 months from contract to closing on a property.

Taxes When Purchasing Property in The USA as a Foreigner We recommend that you speak to a local tax specialist in your home country who specializes in buying property in the USA.

Do I Need a Conveyancer When Buying a Property in The USA?

No – In the USA, the purchasing process is much more straightforward than in the UK. In 99% of cases, there is no need for hiring a lawyer or conveyancer; the agent(s) involved in the transaction will fill in all necessary paperwork to transfer ownership of the property.

Infographic: Buying Property in The USA as a Foreigner