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Mortgage Advisor & Director
Can anyone buy property in the US?
Yes! You do not need to be a US citizen or have resident status to buy property in the US.
However, if you’re looking to buy property with a US mortgage, the are certain categories of people who will find it easier to be accepted for a mortgage:
- Permanent residents with a “green card” (Form I-551)
- Non permanent residents with a work visa (E1, E2, H1B, H2A, H2B, H3, L1 and G1-G4)
If you do not live or work in the US you will find it more difficult to apply for a US mortgage, but it is not impossible. As with any mortgage application, demonstrating proof of income, affordability and creditworthiness will all help.
Non-residents may find that the mortgages they are offered are not as favourable. A broker will be able to steer you towards the lenders most suited for your situation.
Can I buy in the US with a UK mortgage?
Yes, although not all UK lenders will be happy to arrange a mortgage to buy overseas - it makes it more difficult for them to value the property, for example. In general, if the lender you choose is international and has offices in the country you wish to buy in, they may be more likely to lend to you.
Some UK buyers choose to remortgage their UK home with their lender in order to raise the funds to buy outright in the US. Whether this is the right route for you will depend on the value of your UK property, the value of your US property, where you plan to reside, and your general financial situation.
Beware - overseas mortgage brokers are not governed by the FCA (Financial Conduct Authority).
How do mortgages work in the US?
Up until the financial crash of 2008, most mortgages in the US had interest rates fixed for the duration of the mortgage. Many lenders still offer long periods with fixed rates, such as up to 30 years. Other lenders will offer shorter periods of five, ten or fifteen years.
Variable rate mortgages also exist without any fixed terms for interest rates. These products are referred to as ARMs (Adjustable Rate Mortgages).
You can now also choose a “hybrid” mortgage, which is more similar to the mortgages available in the UK. These mortgages have a fixed interest rate at the start, which then switch to a variable rate after the introductory period. You might see this expressed as ‘3/1 ARM’ or ‘5/1 ARM’ for example, which indicates they have a fixed rate for three or five years at the start, before switching to an adjustable rate.
Foreign buyers with a strong credit record (no adverse credit or issues in proving their income) will usually need a deposit of between 20% and 30%. However, if you buy with an FHA mortgage, you could buy with a deposit as low as 3.5% (see below).
What is an FHA mortgage?
An FHA mortgage is a mortgage that is insured by the Federal Housing Association. With these mortgages, if you were to fail to make payments or lose your home, the lender would be able to claim their lost income from the FHA. For this reason, lenders see these loans as less risky, and will offer these mortgages with a deposit of just 3.5%.
To benefit from an FHA mortgage, you will need to make insurance payments to the FHA, called a Mortgage Insurance Premium (MIP). The amount that you pay and how long you pay it for will depend on the duration of the mortgage and the loan-to-value.
FHA mortgages are aimed at mid-low income homeowners looking to buy and occupy their home. They aren’t available for buy-to-let mortgages, or for people who want to buy a property they won’t live in full-time (such as holiday homes, or second homes).
What else do I need to know about the US mortgage market?
It may surprise you to learn that US lenders move quickly. Even for non-US applicants, you could have your mortgage accepted in four weeks or less.
If you’re a first-time non-US buyer, you may be required to make certain payments up front and in advance, such as certain local taxes, and your first year of home insurance payments.
If you choose to take out a US mortgage, your mortgage will be in US dollars. This means that even if you fix the interest rate, your monthly repayments will vary in line with fluctuating exchange rates (assuming that the rest of your finances are in Pound Sterling). If there is a sudden change to the value of the pound or the dollar, the amount you repay each month will be affected. If you prefer stability in your outgoings, you may prefer a UK mortgage to avoid these issues.
How do US lenders calculate affordability?
US lenders follow a pretty standard rule of thumb.
Your debts and other monthly commitments cannot exceed 38% of your income.
If you already have high credit card bills, or an existing mortgage that you continue to repay, you will likely not succeed in applying for a US mortgage with a high monthly repayment, as this would likely tip you over the 38% mark.
What do I need to apply for a mortgage in the US?
If you’re a permanent US resident and have a Green Card, you’ll need:
- 2 years’ of “W-2 forms” (equivalent to a UK P60)
- Most recent payslip
If you do not have a green card, but you’re living in the US with a resident visa, you’ll need:
- Last year’s W-2 form (depending on how long you have been resident)
- Most recent payslip
- A copy of your visa and passport
- Your last 3 months’ bank statements
- Your UK credit report
- A copy of the most recent mortgage statement for any property you own in the UK
What proof of income will I need?
Employed people will require:
- Your last three month’s payslips
- Your latest P60 and employers reference
- Your last three month’s personal bank statements
If you are relocating to the US through your employer, you will also need to show your work visa.
Self-employed people will require:
- Your last two year’s audited accounts, tax returns and your accountant's reference
- Your last three month’s personal bank statements
This is at a minimum, depending on your circumstances a lender may require further documentation.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
