H1B Visa: Buying House and Obtaining a Mortgage Home Loan
If you’re a recent immigrant to the US on a work visa such as an H1B visa, you’re probably wondering if it makes sense for you to achieve the American dream of owning a house rather than renting. 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 just not sure if it makes sense to make one of the most important financial decisions with uncertainty around visa renewals and extensions.
In this blog, we’ll discuss everything you need to know about owning a house on an H1B visa and various home financing options available for H1B visa holders.
What is an H1B Visa?
H1B visas are temporary nonimmigrant work permits given by the US government, allowing American companies to hire foreign workers approved by US Citizenship and Immigration Services (USCIS) for H1B visas.
This specialty occupation work permit allows overseas immigrants to work and live in the United States. It requires applying specialized knowledge and a bachelor’s degree or equivalent working experience. The visa is valid for three years and has a maximum duration of six years.
Can an H1B Visa holder buy a house in the USA?
Yes, H1B visa holders can buy a house in the US without any restriction. All US non-citizens, both US residents or non-resident, can purchase and own a home or property in the US.
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 details.
H1B visa holders are also eligible for a mortgage in the US as long they meet certain eligibility requirements. You may even qualify for home financing if you are new to the US on an H1B visa without an established US credit history.
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 H1Bvisa 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.
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
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 $52,000 (source: SSA).
Much higher than the overall average US income for H1B Visa workers in the US means their overall net worth will grow over time. Therefore, investing in US real estate is one of the safest and secure ways to build wealth over a longer time horizon.
Average H1B Salary in Top 10 States by LCA volume
|State||Average Yearly Salary|
|Overall Average||$ 126,212|
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!
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 H 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 H1B visa
In the long run, it’s always cheaper to own a house than renting. 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 clear benefits of owning a home on an H1B visa, let’s discuss various options for home loans for H1B visa holders.
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.
Find the best real estate agent with international expertise
Connect with a local US real estate agent(s) with CIPS designation
Home Loans for H1B visa holders and US non-citizens
H1B visa holders and US non-citizens on other work visas such as L1 have different mortgage options available depending on their personalized needs and US residency and credit score.
H1B Mortgages for US Newcomers with no or thin US credit history
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 the US newcomers on visas such as H1B and Non-residents 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.
Mortgage home loan options for H1B visa holders with established US credit
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.
However, 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:
US Mortgages for H1B Visa Holders
Get pre-qualified for a US Mortgage on H1B Visa from specialized H1B lenders.
FHA loans (Federal Housing Administration loans) for H1B visa holders
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.
For an H1B visa holder, eligibility for an FHA loan depends on the borrower meeting the following guidelines as described in the FHA loan rulebook:
- “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 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; and
- the Borrower satisfies the same requirements, terms, and conditions as those for US citizens.”
Conventional Mortgages for H1B visa holders
A conventional mortgage is one that’s 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 mortgages, which means that they don’t meet Fannie Mae’s or Freddie Mac’s guidelines and generally have higher loan amounts than conforming loan limits.
Conventional Mortgages v/s 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|
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 25% by most lenders.
Buying house on H1B visa – what are some risks you should keep in mind?
While there are plenty of reasons to buy a house on an H1B visa, the uncertainty around H1B visa extensions and renewals might still be a deterrent for H1B visa holders, especially if you don’t have your I-140 or green card application in process.
Rent your house in the US if your H1B extension gets denied
However, in the worst-case scenario that you have to return to your home country due to visa issues, you can continue to own your house in the US as a non-resident. You can generate rental income to take care of 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 that you keep making your monthly mortgage payments to avoid foreclosure.
US non-citizens, both US residents or non-resident, can buy and own a house in the US and have the same ownership rights as US citizens.
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 do so from your home country through a power of attorney in the US. You might even be able to meet part of the residency requirement for tax exemption on the gain on sale of your primary residence in the US if you had to sell your home early due to issues with your H1B visa.
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 it to put 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.
US Mortgages for H1B Visa Holders
Get pre-qualified for a US Mortgage on H1B Visa from specialized H1B lenders.