H1B Visa: Buying House and Obtaining a Mortgage Home Loan

Are you relocating to the US, or are you a US newcomer on a work visa such as an H1B visa? Or you have been in the US on an H1B visa for a while. You’re probably wondering if it makes sense for you to achieve the American dream of owning a house rather than renting in either scenario. For example, do you have to wait 2+ years to establish a US credit before being eligible for a mortgage in the US on an H1B visa (or, for that matter, L1A, L1B, O-Visa, or an EAD)? On another note, you may have been in the US on a nonimmigrant work visa, such as an H1B visa, for a while and are unsure if it makes sense to make one of the most important financial decisions with uncertainty around visa renewals and extensions.

This blog will discuss everything you need to know about owning a house on an H1B visa and various home financing options available for H1B visa holders.

Can an H1B Visa holder buy a house in the USA?

Yes, H1B visa holders can buy a house in the US without any restrictions. All US non-citizens, either US residents or non-residents, can purchase and own a home or property in the US.

Is it risky or safe to buy a house on an H1B visa?

H1B visa holders often delay buying a house in the US due to visa uncertainty. However, the point they miss is buying a house in the US is an investment, independent of your visa situation. If you get to live in your investment, it’s icing on top. You don’t want to miss out on the best and safest way to build wealth – investing in real estate.

In fact, from Mar 2016- to Mar 2020, non-US resident foreign buyers invested an average of $48 Billion per year in US residential real estate (source: NAR, doesn’t include new builds). This is due to the high rental yield in the US, which generates positive cash flow in most situations (after accounting for mortgage payments and other property taxes). In addition, you have an appreciating asset (in USD) in the world’s most stable and biggest economy.

If you have to leave the country due to visa issues, you can continue to legally own the property in the US as an investment property and generate rental income. The fact that global real estate investors not living in the US buy ~$50 Billion worth of real estate every year in the US to achieve their financial and investment goals itself is a testament to why this risk for H1B homebuyers is more of a perceived risk than an actual risk.

In reality, the availability of H1B mortgage options for US Newcomers with no or thin US credit and specialist H1B mortgage lenders, if you have established US credit, makes H1B homeownership easier and more accessible than ever before.

Below are the top reasons why buying a house on an H1B visa is safe and an excellent investment.

Top 5 Reasons Why You Should Consider Buying a House on an H1B Visa

Foreign workers on H1B visas often have a more extended stay, making it less likely they’ll only be renting as they settle with their life in the US and generally explore options of buying a house on an H1B visa.

There are many reasons why H1B visa holders are taking the plunge into buying a house in America and why it makes sense to buy a home in the US as a foreign national on an H1B visa sooner than later.

Here are some of the top benefits for H1Bvisa holders considering buying a house in the US:

1. Improves Quality of Life in the US

Buying a home will likely increase your quality of life and sense of belonging in America, especially if you plan to live in the US on an H1B visa for an extended period. The quality of life becomes especially important if you are bringing up children here or planning your first child while working in the US on an H1B visa. In addition, homeownership is one of the pillars of the American dream, and buying a home is often the first step to creating your own family and community here in the US.

2. Safe and secure way to build wealth for H1B visa holders

The average home value in the US has appreciated by almost 46% in the last five years, from $208,000 in Aug 2016 to $304,000 in Aug 2021, and will further increase to $335,000 (~12%) by Jul 2022 (Source: Zillow Home value index).

Trend of Home Value in the US

To put this into perspective, if an H1B visa holder bought a house worth $500,000 in Jul 2016, the home value would have appreciated to around $800,000 by Jul 2022 (per expected home value forecast) in 6 years, i.e., maximum years on an H1B visa. That’s over $300,000 worth of wealth creation in 6 years!

As per the Labor Condition Application (LCA) data released by the US Department of Labor, as of Q2 2021, the average yearly wage for a foreign worker on an H1B visa was $126,212 (based on 184,141 certified LCA applications for H1-B submitted in this period).

H1B worker salary is significantly higher than the average US worker wage of around $52,000 (source: SSA).

Much higher than the overall average US income for H1B Visa workers in the US means their overall net worth will grow over time. Therefore, investing in US real estate is one of the safest and most secure ways to build wealth over a longer time horizon.

Average H1B Salary in Top 10 States by LCA volume

State	Average Yearly Salary
CA	$ 152,145
TX	$ 114,737
NY	$ 133,929
WA	$ 140,193
NJ	$ 122,897
IL	$ 115,863
MA	$ 121,414
NC	$ 114,719
GA	$ 110,618
PA	$ 113,583
Overall Average	$ 126,212

3. Tax Benefits of owning a home on an H1B visa

As H1B visa holders are likely to stay in America for several years, buying a house on an H1B visa can be beneficial from a tax perspective. To encourage homeownership, the IRS has provided several tax breaks for owning a home in the form of deductions. A tax deduction reduces your adjusted gross income, which in turn reduces your tax liability. Here are some of the most common tax deductions you can get for owning a home on an H1B visa:

Mortgage Interest Deduction

You can claim deductions for any mortgage interest payment made during the financial year (up to $750,000) as well as any points paid to secure a mortgage. Your lender will send you IRS Form 1098, which will show the amount of interest you paid in the previous year.

Property Tax Deduction

H1B visa holders can claim deductions for the property taxes they pay on their homes each year, which could save them thousands in tax liability. You can claim this deduction on both federal and state taxes as applicable.

Private Mortgage Insurance (PMI) Deduction

PMI is a fee that lenders charge to borrowers who put down less than 20% of the total amount needed for a mortgage. You can deduct your PMI payments from your tax obligations.

Tax benefits of selling your home on an H1B visa

You won’t have to pay taxes on the first $250,000 of profit if you’ve owned and resided in the property for at least two of the previous five years. If you’re married and filing your taxes jointly, the capital gain exempted from taxes doubles to $500,000, but both spouses must meet the residency requirement.

Home Office Deduction

Covid-19 has changed the landscape of how we work, and remote work is becoming very common irrespective of your immigration status. H1B visa holders can claim a deduction for any part of their home that they use exclusively and regularly as an office.

4. Home prices are affordable in the US

House prices in several US metro areas are low when compared to central regions of other global cities. For example, even in a relatively costlier US city like San Francisco, per square meter of residential real estate costs $5,890 compared to $26,262 in London (UK), $28,570 in Hong Kong (China), $10,947 in Toronto (Canada), $10,932 in Mumbai (India), etc. (Source: National Association of Realtors)

Compared to other countries like Australia or Canada, mortgage rates & home prices have historically been much lower in the US, making it more affordable for H1B visa workers who want to buy a house in America.

5. Owning a home is generally cheaper v/s Renting on an H1B visa

In the long run, it’s always cheaper to own a house than to rent. You can use your monthly rent payments towards building equity in an appreciating asset which is your dream home in the US. Buying a house is also beneficial from an investment perspective as it helps create wealth over time.

H1B visa holders can enjoy many benefits and financial advantages of buying a house in the US. With the clear benefits of owning a home on an H1B visa, let’s discuss various options for home loans for H1B visa holders.

Considerations	Renting	Buying
Financial Considerations	Lower upfront costs (security deposit) and monthly rental payments	Higher upfront costs (down payment, closing costs) and ongoing mortgage payments
Building Equity	Rent payments do not contribute to building equity	Potential equity accumulation and property appreciation over time
Flexibility and Mobility	Greater flexibility to relocate without long-term commitment	Stability and security in owning a home, with potential for long-term investment returns
Personalization and Investment	Limited ability to customize or make significant changes to the property	Freedom to personalize and invest in the property, adding value over time
Maintenance and Repairs	Landlord or property management company is generally responsible for maintenance and repairs	Homeowner’s responsibility for maintenance and repairs, but the ability to control the quality and timing of repairs
Stability and Security	Less stable due to the possibility of lease terminations or rent increases	Offers stability, security, and a sense of belonging in owning a home
Tax Benefits	No tax benefits from mortgage interest deductions	Potential tax benefits, such as deducting mortgage interest and property taxes, reducing overall tax liability
Market Risks	Shielded from potential decline in property value	Potential for property appreciation and long-term investment gains
Long-Term Cost Stability	Rent can increase over time due to market conditions or lease renewals	Fixed mortgage payments provide long-term cost stability and protection against rising rents

Pro Tip: When you are ready to buy a house in the US on an H1B visa, you should ideally work with a real estate agent who has expertise in working with foreign national clients, such as a real estate agent with CIPS designation. 

A CIPS (Certified International Property Specialist) real estate agent has undergone specialized training to handle real estate transactions smoothly for foreign-born individuals residing in the US, such as foreign workers on an H1B visa. 

Please refer to our complete guide on the step-by-step process to buy a house in the US as a foreign national on an H1B visa for more details on how to purchase a house in the USA as a foreign national.

6. Mortgage payments are less volatile than rent payments

One major advantage of owning a home is that mortgage payments are often more stable than rent payments. This is because rent can increase year after year, while a mortgage payment is fixed for the life of the loan. This stability can be especially important for those on a visa, as job security and income may be less certain.

Requirements for H1B Mortgages

On an H-1B visa, most lenders will decide the status of a mortgage applicant on a case-by-case basis by utilizing the information available to them. Most lenders require the following:

• SSN, If you are in the US
• Valid work visa
• 2 years US credit history for traditional mortgages (No work history mortgages options available)
• No credit is required for H1B visa newcomers
• 2 years US employment history
• Good credit score, ideally over 670 (No US credit mortgages are also available)
• US income that you expect to continue for at least 3 years
• If you apply for an FHA loan, you will need an Employment Authorization Document (EAD) from the USCIS.

H1B Visa Mortgage Options

H1B visa holders and US non-citizens on other work visas, such as L1, have different mortgage options depending on their personalized needs and US residency and credit score.

H1B Mortgages for US Newcomers with No/Thin US Credit History

1. Foreign National Mortgage

If you’re a US newcomer on an H1B visa with no or thin US credit, contrary to what you might think, you don’t have to wait for 2+ years to establish a US credit score before becoming eligible for home financing in the US. Some US lenders offer foreign national mortgages to US newcomers on visas such as H1B and non-resident at competitive rates.

Refer to our detailed guide on the step-by-step process to obtain a mortgage as a US Newcomer on an H1B visa with no US credit history.

Requirements for Foreign National Loan

The qualification requirements for foreign national loans or non-resident loans can vary among lenders. However, here are some common factors considered by lenders when assessing eligibility for foreign national loans:

• Valid visa or legal status: As a foreign national, you will typically need a valid visa or legal status in the country where the property is located. Lenders will verify your immigration status and may require proof of residency or a work visa.
• Down payment: Foreign national loans often require a higher down payment than loans for citizens or residents. Lenders may expect a down payment of 20% to 25% or more of the property’s purchase price.
• Credit score: Lenders require a credit report from your home country or an international credit report.

2. DSCR Loan

H1b Visa holders who wish to buy a rental property to earn a handsome side income can opt for a DSCR loan. This loan type is based on the ability of the property to generate positive cash flow, and borrowers with thin and No US credit scores can apply for it easily. It overlooks the stringent paperwork usually associated with conventional loans making the loan procedure easy and swift.

Requirements for DSCR Loan

The DSCR measures the property’s ability to generate sufficient income to cover its debt payments. The specific requirements for a DSCR loan can vary among lenders, but here are some common factors considered:

• DSCR Ratio: Lenders may require a minimum DSCR of 1 or higher, meaning the property’s income should exceed its debt payments.
• Cash flow documentation: Lenders will require thorough documentation of the property’s income and expenses. This includes rent rolls, lease agreements, and operating statements. The documentation should clearly show the property’s cash flow and ability to support the loan payments.
• Credit score: Lenders typically require a credit score 620, but some lenders don’t mandate the credit score for immigrants, and H1B visa holders can easily qualify for a DSCR loan.
• Down payment: Generally, it’s 20-25%, but if you are getting it without a credit check, then it could go higher.

H1B Mortgage Options with Established Credit History

An H1B visa holder with an established (2+ years) US credit score will have multiple home financing options available to them. However, your choices will depend upon how much house you can afford, how much you’re willing to put in as a down payment, and your loan amount.

Therefore, H-1B visa holders can apply for all types of mortgage home loans in the US, including FHA loans, conventional mortgages, and jumbo mortgages. 
1. FHA Loans

FHA loans are government-backed mortgages insured by the Federal Housing Administration. FHA home loans require lower minimum credit scores and down payments than many conventional loans, making them especially popular with first-time homebuyers.

FHA Loan Requirements for H1B Holders

• The property will be the Borrower’s Principal Residence.
• The Borrower has a valid SSN, except for those employed by the World Bank, a foreign embassy, or an equivalent employer identified by HUD.
• The Borrower is eligible to work in the United States, as evidenced by the Employment Authorization Document issued by the USCIS.
• FHA loans generally require a minimum credit score of 580.
• The minimum down payment requirement for an FHA loan is 3.5% of the purchase price or appraised value of the property, whichever is lower.
• Lenders typically look for a maximum debt-to-income ratio of 43%.

2. Conventional Mortgages

A conventional mortgage is not guaranteed or insured by the federal government.

Conforming mortgages are the most popular conventional mortgages because they fulfill the requirements to be sold to Fannie Mae or Freddie Mac, government-sponsored enterprises that purchase mortgages from lenders and sell them to investors. Thus, they are called conforming since they meet the minimal standards for sale to Fannie Mae or Freddie Mac.

Conventional mortgages can also be non-conforming or jumbo, meaning they don’t meet Fannie Mae’s or Freddie Mac’s guidelines and generally have higher loan amounts than conforming loan limits.

Conventional Mortgage Requirements for H1B Home Buyers

• SSN and Visa Documents
• Recent pay stubs, W-2 forms, and income tax returns.
• A minimum credit score of 620 or higher.
• 3% to 20% down payment of the purchase price.
• A maximum debt-to-income ratio of 43% to 50%.

Conventional Mortgages v/s FHA Loans

	Conventional Mortgages	FHA Loans
Credit score minimum	620	500
Down payment	3% to 20%	3.5% for credit scores of 580+; 10% for credit scores of 500-579
Loan terms	8- to 30-year terms	15- or 30-year terms
Mortgage insurance premiums	PMI (if less than 20% down)	Upfront premium: 1.75% of loan amount; annual premium: 0.45% to 1.05%
Interest type	Fixed-rate or adjustable-rate	Fixed-rate

It is advisable to work with mortgage lenders in the US who specialize in H1B mortgages. Unfortunately, not all mortgage lenders and their underwriters know the unique circumstances and documentation for H1B visa holders, even if they can originate the mortgage product. This can create unpleasant experiences and unnecessary complications during one of the most important financial transactions of your life.

HomeAbroad partner mortgage lenders in the US specialize in H1B mortgages, suited for your specific mortgage home financing needs such as:

Best Mortgage Lenders for H1B Visa

When searching for the best mortgage lenders for H1B visa holders, it’s crucial to find lenders who have experience working with non-resident buyers and understand the unique circumstances surrounding H1B visa holders.

HomeAbroad has a network of H1B visa mortgage lenders, and we can connect you with one to save you tons of research and give you a headstart.

How much down payment for a house do H1B Visa holders need?

Depending on your particular loan situation, your downpayment can be as low as 3% with conventional mortgages. If you have enough savings to make a down payment of 20% or more, you won’t have to pay for private mortgage insurance every month. Even if you put down less than 20% of the purchase price, you can remove the mortgage insurance once you reach 20 percent equity.

With FHA loans, you can put 3.5% of the purchase price for credit scores of 580+; 10% for credit scores of 500-579.

For foreign national H1B mortgages with No US credit history, you will have to put a downpayment of at least 20% by most lenders.

Arrange Donwpayments on an H1B Mortgage

If you don’t have 20-25% saved up for a downpayment, there are a few other options available to you. One option is to get a loan from family or friends. Another option is to look into down payment assistance programs that your state or local government may offer. You can also get a personal loan.

Keep in mind that even if you’re able to come up with the down payment, you’ll also need to have enough saved up for closing costs, which are typically around 2-5% of the purchase price of the home. Once you’ve saved up enough for both the down payment and closing costs, you’ll be on your way to homeownership!

The Problems H-1B Home Buyers Face

Despite the potential stability that owning a home can provide, there are a number of challenges that H-1B visa holders face.

For one, your visa status is tied to your job – if you lose your job, you could also lose your visa and be forced to leave the country.

In addition, most lenders require borrowers to have a steady income that they expect to continue for at least three years. This can be difficult to prove for H-1B holders, who may only have a job for a set period of time.

However, you can still go for buying a house in the US on an H1B visa. Here is what you can do if you have to back.

Buying a house on an H1B visa – If you return to your native country, what are your options?

While there are plenty of reasons to buy a house on an H1B visa, the uncertainty around H1B visa extensions and renewals might still deter H1B visa holders, especially if you don’t have your I-140 or green card application in process.

#1 Rent your house in the US if your H1B extension gets denied

In the worst-case scenario that you have to return to your home country due to visa issues, you can continue owning your US house as a non-resident. You can generate rental income for mortgage payments and other home-related expenses. 

Investing in US real estate might still be an excellent financial decision with capital appreciation in US Dollars with increasing home value in the US. 

In such a scenario, ensure you keep making your monthly mortgage payments to avoid foreclosure.

US non-citizens, both US residents and non-residents, can buy and own a house in the US and have the same ownership rights as US citizens.

#2 Selling your house on an H1B visa if you have to return to your home country

If you decide to sell your US house, you can easily do so from your home country by working with a real estate agent experienced in foreign national and cross-border transactions. You might even be able to meet part of the residency requirement for tax exemption on the gain on the sale of your primary residence in the US if you had to sell your home early due to issues with your H1B visa.

#3 Allow your family or friends to live

If you are leaving the United States, but your kid or a family member is still there, you might choose to allow that individual to stay in your home. You may ask your close relative or friend to pay you rent or pay the mortgage installments and property taxes on your behalf.

H1B Home Buying Mistakes

Purchasing a home is a significant milestone, and it’s crucial to avoid common mistakes that H1B visa holders might encounter during the home-buying process. Here are a few key mistakes to watch out for:

• a) Not understanding your budget: Before beginning your home search, assess your financial situation and determine how much you can afford. Consider down payment, monthly mortgage payments, property taxes, insurance, and maintenance costs. Avoid the temptation of stretching your budget too thin, as it can lead to financial stress.
• b) Failing to research neighborhoods: Thoroughly research the neighborhoods where you plan to buy a home. Consider factors like proximity to your workplace, amenities, safety, and future development plans. Take the time to visit the neighborhoods and explore the local community to ensure it aligns with your lifestyle and preferences. HomeAbroad can connect you with CIPS agents (special real estate agents for foreigners) to help you find and buy the right home. CIPS agents understand your unique needs and find the properties accordingly.

• c) Skipping the home inspection: Never underestimate the importance of a home inspection. Engage a professional home inspector to assess the property’s condition, including structural integrity, plumbing, electrical systems, and potential issues. Identifying any problems beforehand can save you from expensive repairs down the line.
• d) Ignoring future plans: Consider your long-term plans before purchasing a home on an H1B visa. If you anticipate changes in employment or potential relocation, it’s essential to factor in the possibility of renting or selling the property. Buying a home should align with your long-term goals and provide flexibility.
• e) Not seeking professional guidance: The home buying process can be complex, especially for H1B visa holders who may have unique considerations. It’s advisable to work with professionals, such as real estate agents and attorneys, who have experience handling transactions involving non-resident buyers. Their expertise can help you navigate legal requirements, contracts, and other complexities.
• HomeAbroad can connect you with CIPS real estate agents and mortgage lenders to find and buy your perfect home in the US.

Things to Ponder:

Pay the mortgage to avoid default

It is essential that you keep up with your mortgage payments, even if you are leaving the United States. If you default on your mortgage, your lender could foreclose on your home.

Additionally, if the sale of your property does not cover the full amount of your mortgage, your lender could pursue you for the deficiency.

One way to avoid default is to contact your lender and explain your situation. You may be able to work out a forbearance agreement in which your lender agrees to suspend your payments for a period of time.

You may also be eligible for a loan modification, which could lower your interest rate or extend the term of your loan.

Beware of international transfer fees when paying your mortgage

If you decide to leave the United States, you will still owe money on your mortgage. Even though it is feasible to keep your US bank account, you may be required to make payments from abroad. International transfers can be costly. Explore your options for how to remit money to your lender in order to avoid paying these costs.

Stick to a budget

If you’re an H-1B holder and thinking about buying a home, consider your present visa status, your job situation, and your long-term goals. Many H-1B visa holders put off purchasing a house until they receive their Green Cards. If you do choose to buy a house, make sure you don’t buy an extravagant house. Set a budget and abide.

In Conclusion

Buying a house on an H1B visa is an excellent investment and one that H1B visa holders should consider for their long-term financial goals. H1B visa holders have different mortgage options available to them irrespective of their credit situation in the US. Therefore, you can make the goal of homeownership in the US much faster instead of waiting for 2-3 years to own a house if you can afford to put in a higher down payment amount. In contrast, you can put as low as a 3% down payment with established credit and work history in the US.

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