How can a non-citizen buy residential property in the U.S.?
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How can a non-citizen buy residential property in the U.S.?

Moumita Basu

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The housing market in the U.S. is amazingly friendly and convenient for foreigners who want to invest in property throughout the country. The U.S. government doesn’t have restrictions or hidden charges like extra stamp duties for non-citizens planning to buy a property. The experience of buying a property in the U.S. may not differ too much from your home country. If you live outside the U.S. and plan on moving to the States, you are in luck.

Unlike many other things, to buy property in the U.S., you don’t have to be a citizen. Foreigners also qualify for mortgages if they meet specific criteria. But in terms of tax, foreign property owners face quite a bit of challenge compared to the citizens. This blog will provide you with a comprehensive guide to navigating safely how to buy property in the U.S.

Can foreigners buy real estate in the U.S.?

The short answer is yes, foreigners can buy property in the U.S. with relatively few roadblocks. However, buying a property as a non-resident in the U.S. might present a few challenges compared to purchasing a property if you are a citizen.

The first challenge you might face is financing, as lenders are less likely to offer mortgages to foreign customers. Secondly, some property types might not be suitable for foreigners. Finally, there are also tax implications if you are a foreigner or a non-resident who owns a property in the U.S.

What type of property can a foreigner buy in the U.S.?

If you are planning to buy property in the U.S. as a foreigner or a non-citizen, the first question that might be on your mind is can foreigners purchase an investment property in the U.S.? The good news is that there are no legal barriers for foreigners to buy property in the U.S. You can apply to purchase property in the U.S. by living there full-time, as a green card holder, as a non-resident investor, or as a vacation property.

Foreigners can also buy single-family homes or condo units or invest in commercial real estate. The only common barrier they might run into is purchasing cooperative housing. In the case of co-ops, you are not buying the property but a share in the cooperative that owns the condo building. Co-op properties might be cheaper than other forms of housing, but they are primarily intended for residences, so they aren’t suited to investment properties.

What are the rules for foreigners buying property in the U.S.?

Foreigners can buy property in the U.S. without any legal restrictions. If you are a non-resident and want to invest in a property in the U.S., the easiest way to fund that payment is via cash. Getting a local mortgage might be tricky if you have no local credit history. While it is not impossible to get a local mortgage as a foreigner or non-resident, you might face high-interest rates and a hefty down payment to unlock a mortgage.

Suppose you are a permanent or a longtime resident of the U.S. or a refugee who has been granted asylum status. In that case, you might qualify for a housing loan through Federal Housing Administration (FHA). Compared to private mortgage providers, FHA offers better terms and rates for qualifying buyers.

What documents will you need to buy property in the U.S.?

While buying a property in the U.S., you must provide paperwork to support your buy. If you are getting a mortgage or any other home financing, you will need supporting documents to support your loan application. While each situation will be different, the standard documents that you have to provide are:

  • Proof of identity- This includes passport, green card, visa, and other documents like Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
  • Proof of address and residence status- Usually, you can show your driver’s license or other official identification. In some cases, you might have to provide legal residence status if you intend to live on the property
  • Proof of income- To qualify for a mortgage, you have to provide evidence of repayments on time. This usually includes pay stubs and tax returns
  • Proof of affordability- If you are lending money to pay for your property in the U.S., you have to furnish evidence of any outstanding loans or debts to assess the affordability of loans

What are the property tax rates in the U.S. for non-residents?

In general, income from real property located in the U.S. owned by a non-resident is taxed at 30% if it is not effectively connected with a U.S. trade or business.

How to choose property income?

Suppose you are a non-resident in the U.S. who holds or owns an interest in property located in the U.S. for income. In that case, the NRA can choose to treat all income from that property as income effectively connected with a trade or business in the U.S. This will apply to all income from real estate located in the U.S. If the choice is made, deductions can be claimed attributable to the real property income so that net income will be taxable.

The bottom line is that buying a property in the U.S. requires a good credit score and history. Sign up for a Zolve Credit Card and Zolve Bank Account, and start building your credit footprint in the country from Day 1.