Can Foreigners Buy Property in Texas? Everything You Need to Know!

Yes! foreign nationals are allowed buy properties in Texas. Texas is a great place to buy a property whether you are a foreigner or not. Texas has an open real estate market for every type of purchase.

Foreigners can buy any type of property available to U.S. citizens, with a few exceptions. However, buying property in Texas can be a significant investment, so don’t miss out on this opportunity! Keep reading to know everything about home buying in Texas as a foreigner.

Buying Property in Texas

More and more people are moving to Texas for its unique culture and diverse housing options, from small towns to big cities. We can assume that the completion to buying the best property can be tight, but Texas offers a range of options for everyone, and with good research and a real estate agent, you, too, can find a property or a home of your choice.

Depending on your financial status, you may pick between a low-cost and high-end property. All you have to do now is be sure and prepared for your finances before making a purchase.

You must also remember the requirements to purchase a house, like the down payment, the type of mortgage program you are going for, and how you may qualify. This should all be included in your budget.

What Should Foreign Real Estate Buyers Know When Buying a Property in Texas?

You may have a few concerns and issues to address before purchasing a home in a new state or country as a foreigner. Here are some of the most typical questions asked by foreign nationals that we have addressed.

Is credit score important?

To buy a real estate property or a house as a foreigner in Texas, you will need to prove your credit score, and for that, you will need to have a Tax Identification Number (TIN) from the Internal Revenue Service (IRS).

But since you might be a newcomer as a foreign buyer in the U.S., it will be difficult to build a good credit score for proof. HomeAbroad can help you buy a house with zero or no credit score! We connect you with lenders that provide mortgages without US credit.

Will the lender lend for your foreign real estate portfolio in the USA?

The answer is yes. Investment funds and institutional lenders lend money to foreigners. They also usually have less complicated processes than those who don’t. And even though banks will hesitate to lend to a foreigner because of the new banking regulations that make it very tough for the banks to comply with the rules, HomeAbroad can help you connect to the right lender for your real estate purchase in Texas!
We have a network of lenders that work with foreign nationals and provide them mortgages with no US credit.

What is an LLC? Do I need an LLC to buy a property in the U.S.?

An LLC or a Limited Liability Company is a business in the United States that protects its owners from being responsible for its debts or liabilities. This type of business combines the features of a corporation and those of a partnership or sole proprietorship.

As a foreign buyer, you can choose to set up an LLC or not. You are eligible to buy a property in your own name since Texas is a common state for properties. For instance, if you are married, it will go unnoticed that the property you acquire will be shared equally by both of you as a 50/50 owner of the property, no matter whose name is on the property title.

Please refer to an attorney and CPA when you create an LLC, as tax implication varies based on your situation.

We suggest that you make sure to speak to an attorney and a CPA before creating your LLC, as the tax implications will differ depending on your specific circumstances.

Helpful Read: Buying a House with an LLC: A Definitive Guide

What are U.S. tax implications or FIRPTA?

FIRPTA, or The Foreign Investment in Real Property Tax Act of 1980, is a tax law that imposes income tax on foreigners selling real estate property in the U.S. For example, you buy a property for $100. Then, after owning it for some time, you want to sell the same property for $200. In this case, the new buyer must pay 10% of the purchase price upfront, so withhold $20 from the total amount.

So, as a foreigner, the IRS requires a percentage of the sales price to be withheld when you sell a property; however, this isn’t as troublesome as it may initially seem. With help from a good title company, you can withhold the amount required by the IRS in an escrow account until your paperwork is cleared (normally taking less than 90 days). Then, you just need to make sure to file your taxes timely to the IRS, and you won’t face an issue with FIRPTA.

Why is Texas a Top Target for Foreign Home Buyers?

Although, over the decade, the purchase rate of U.S. homes and properties by foreign buyers has reduced to the lowest. According to the latest National Association of Realtors study, Texas is still the target of many foreign buyers. In the year ended this March, foreign buyers spent $54.4 billion on American residential real estate — a decrease of 27% compared to 2020.

Because of the constantly changing political and economic scenario in the U.S., foreign purchase in the U.S. real estate market has been experiencing a downfall for years now. According to a recent report, the value of foreign buyers’ investments in U.S. property has decreased by more than 80% since the market’s peak in 2017. The coronavirus pandemic and increased competition for domestic properties contributed to this slump last year.

According to The Dallas Morning News, “The big decline in foreign purchases of homes in the U.S. in the past year is no surprise, given the pandemic-induced lockdowns and international travel restrictions,” Realtors’ chief economist Lawrence Yun said in the new report. “Yet, even in the absence of foreign buyers, the U.S. housing market strengthened solidly.

“As travel restrictions loosen and foreign students return to U.S. colleges in the upcoming year, there is likely to be some growth in foreign buying of U.S. real estate,” Yun said. “High home prices and the ongoing lack of inventory could pose a challenge for buyers.”

Foreigners bought 11,000 houses in Texas, making it the third most popular destination. Arizona, New Jersey, and New York were hotspots for offshore purchases. Buyers from Mexico and India accounted for the majority of Texas transactions. 9% OF TOTAL HOME TRANSACTIONS BY FOREIGNERS TEXAS was about 9600 homes.

Process of Buying a House as a Foreign National in Texas

Here is a step-by-step process for a foreigner to buy a property in Texas, USA:

Step 1: Decide where you want to buy the home or an investment property in Texas.

No restrictions are imposed on a foreign national to buy a property anywhere in the United States. This applies to anyone who doesn’t currently reside in the U.S. but is looking to buy property here, whether for primary residency, vacation homes, or investment purposes.

But while you are looking for a property in Texas specifically, you must decide which place in Texas you like the most that fulfill your requirements of owning a home or a property. Depending on your needs, you can choose from many cities, like Waco, Garland, Brownsville, Grand Prairie, Dallas, Beaumont, San Antonio, Fort Worth, Killeen, etc.

Step 2: Find a certified real estate agent.

Finding a real estate agent is the most important step in the buying process. A real estate agent will assist you throughout the process of finding a home and finalizing, signing documents, and closing on it. Finding a realtor who has dealt with foreign investors interested in U.S. real estate investment or foreign-born U.S. residents wanting to buy a house in the United States on an H1B, L1, or F1 visa is critical.

Since there are several hurdles and potential mistakes that purchasers may make if the agent is not experienced in dealing with non-US residents, foreign investors are looking to invest in U.S. property. So it’s important to look out for a certified real estate agent experienced in international and foreign transactions with a CIPS designation.

A real estate agent with a CIPS designation is someone who has specialized in training to work through international transactions smoothly. They can be a great help for foreign nationals buying a property in the U.S. as they are usually bilingual or know multiple languages to connect with every prospective foreign buyer in the U.S.

HomeAbroad will help you match with a CIPS real estate agent, making buying a home simpler.

Step 3: Understand your tax situation as a foreigner in the U.S.

Suppose foreign residents in the U.S. intend to buy a house and use it as their primary residence. In that case, they do not need to worry about the additional tax liability other than property tax.

As a non-resident buyer in the USA, you will be imposed taxes on your net income earned from the property you bought for investment purposes except on the property’s appreciation value.

So, foreigners who buy property in the U.S. will be obliged to some tax compulsions when they generate income from rental property or even if they sell that property and gain profit in the U.S.

As a foreign national, if you wish to purchase a property in the United States, you must get an Individual Taxpayer Identification Number (ITIN)

Step 4: Begin your home search in Texas

The first step toward buying your own property in Texas would be to decide on a location. If you are looking to be the primary owner of residential property, you can make a list of some common questions like, would you want to buy a home in an area with lots of amenities, such as schools, shopping, culture, and so on? Answering these basic questions will help you figure out where you want to live. Which city do you want to reside in? How developed is the region? And if you have children, are there schools nearby?

Nearby bus stops, markets, utility shops, hospitals, and pharmacies. You may ask your real estate agent about these concerns while looking for a home, and they can assist you in selecting the best location for you. Your real estate agent can also help you find the best property by showing you multiple options through open houses and online property tours.

Step 5: Put down the final offer on the property and finalize.

After you are done finalizing your new property, you can ask your real estate agent about similar properties recently sold in that area, as it will be beneficial for you to check the prices on similar properties and negotiate with the seller on your purchase. Most of the time, you can rely on your real estate agent to do the negotiating as it is a fairly common practice in their profession, and they can get the help you with the best price for the property.

The last step in finalizing the property would depend on the seller, as they can choose to accept your final offer, reject it, or even counteroffer you with a similar or a different price. If they accept your offer at last, congratulations, you’re now a property owner in Texas!

Step 6: Conduct a property inspection

Conducting an inspection is an essential step in owning a property. You would want to ensure that the seller is not handing over the property to you with any damages or something left undone. You can buy the property without a home inspection, but it is highly recommended that you hire a home inspector to do a clean check and ensure everything is okay with the property before you close down on the deal.

The home inspector thoroughly examines the property to ensure that it is well-built and functioning. Your real estate agent can list several home inspectors to help you with the process.

Step 7: Sign the buying contract with the seller 

You will need to sign a contract of sale with the property seller after the property inspection is done. The contract of sale is the document that legally ties you to the purchase. The contract will include the agreed-upon price and any other conditions your realtor negotiated on your behalf.

While signing the contract, you must put down 5-10% of the sale price as earnest money. This 5-10% of the money stays in an escrow account until the deal is finally closed. A clause in the contract of sale will probably state that you have the right to back out of the transaction if your legal status changes or a problem with financing arises.

Step 8: Get done with a title report

Your real estate agent can guide you with completing a title report. A title report is essential for buyers as it safeguards them, so make sure to complete one after signing the contract. A title report, in the United States, is a report that states any recent liens with the property and mentions the previous owners of the property. The seller will need to clear any lies with the property, handing it over to you.

Step 9: Obtain Home financing through a U.S. Mortgage for foreign nationals 

On the one hand, you might have heard that you will need a good enough credit score to obtain a U.S. mortgage loan, but on the other hand, you can get a Mortgage as a foreign buyer with no U.S. credit. Some U.S. lenders provide new immigrants and non-resident buyers with low-interest rates on loans if they have no credit history in the United States. These lenders also specialize in foreign national mortgages for non-immigrant visa holders such as H1-B, L-1, etc.

Nowadays, there are several home financing options available for foreign buyers in the U.S. at competitive rates. Foreign newcomers won’t have to wait for the typical 2-3 years to build a good credit history before planning to buy a property in the United States. Even non-residents will not have to pay for the property in all cash, and they can put that cash aside for a better purpose with a high return asset. HomeAbroad can help you purchase a property with zero credit score for all foreign nationals looking to buy a house or any other property in the U.S.

Step 10: You’re a property owner now!

Finally, you have a property in your name in the U.S. At this last stage of closing the deal with the seller, you will need to sign off certain documents closing. Your real estate agent will help you through the closing process. Once all the formalities are done on that day, the seller with hand over the keys of the property to you. Congratulations!

Documents a Foreign National Needs to Buy a Property in Texas

These are the following documents that you need to provide to buy a property as a foreigner in Texas:

• Your valid passport
• A U.S. visa
• Social security number or International Taxpayer Identification Number (ITIN)
• Bank statements including previous and current and, if relevant, financial documents from your foreign bank
• Proof of reserves
• Proof of check stubs
• Your tax return
• Credit Score (No US Credit Mortgage Available)

7 Reasons Why You Must Buy Property in Texas

There is zero state income tax.

In Texas, The state government generates revenue through property taxes instead of income tax. With no state income tax, Texas comes under one of the seven states in which the buyers must pay state income tax in the U.S. This is also one of the major reasons why most people, even in the U.S., are planning to move to Texas since the state income tax is absent.

Although some homeowners complain about the high rate of gain generated by the state through real estate, Texas’ overall tax burden is considerably lower than in other states. Furthermore, there are many tax incentives available to encourage new companies and start-ups to relocate to Texas.

The best seasons

Most people also prefer to buy a property in Texas because of the four-seasoned weather year-round. It is not hot and summery all through the year; instead, Texas is one of the few unique states in the United States where you enjoy and see each season. Texas is the perfect place for those who enjoy all four weather seasons.

• Autumn colors of fall
• Chilly and snowy winters
• The bloom in spring

The weather in Texas is capable of every emotion.

Climate is a big factor to consider when moving to Texas. The southern part of the state is tropical, while the West has deserts and mountains. If you’re looking for wetlands and bayous, head East of Texas, and the north has lots of green fields.

A strong housing market in Texas

There are some strict rules in Texas regarding renting; this is also one of the main reasons why the real estate market in Texas could survive pretty well when the housing market burst from 2007 to 2009.

Regarding real estate in Texas, there’s something for everyone. From stable class B and C multifamily communities in secondary markets to contemporary class A apartments amid the bustle of the big cities.

As a foreigner, if you wish to build your own new building, apartment, or community in Texas instead of buying into the existing real state market, there are more than enough opportunities for everyone to build something of their own since there is plenty of lands available on the Texas ground!

Most importantly, the lovely weather and lack of red tape make it easier to construct faster and more cost-effectively than in other parts of the country.

A diverse state

Many people who move to Texas are from young families. And it’s easy to see why! The state has no income tax and affordable housing, which is attractive for young families and couples wanting to settle down.

The influx of families has created a family-friendly feel across the state. You’ll also find that Texas is a tolerant and diverse location, with thriving multicultural communities throughout the state.

The vibrant city life of Texas

Texas comes among six of the twenty largest cities around the United States. First, there’s Austin, which is said to be the fastest-growing city in the U.S.

Then there’s Dallas, which is popular for its oil and cotton production. There’s also Houston, which is also known as the ‘Space City’ for its connections with NASA. Aside from these metropolitan areas, there’s also Fort Worth, San Antonio, and El Paso – all of which have plenty to be proud of.

In Texas, many people discovered several investment possibilities in secondary and tertiary markets that others overlook. There is money to be made if one knows where to look for the deals, if one does their research and follows a sound investment approach.

More than the diverse and beautiful cities of Texas, people attract to Texas because of its affordable lifestyle, which makes Texas one of the major destinations for foreign nationals to seek jobs and rent out.

Great place for sports enthusiasts

Texas is the right place for you if you are a sports fan! Texans are huge fans of football. There’s always a football event going on on Fridays around the state, which has also been part of many movies. Football in Texas is undoubtedly the most popular sport of all time.

The Houston Astros earned Texans’ admiration last season when they won one of the most thrilling World Series ever. So, Texas adore their baseball, too. Many people who move to Texas want to follow sports teams and feel pride for their states and their teams.

As a foreigner, you can even watch out for the NBA, American Hockey Team, or MLB. Texas is filled with every type of sports enthusiast.

Your residents will rave about your community events when you create a sense of loyalty and excitement. Creating long-term relationships with your residents should be a top priority, and community events are an excellent way to achieve this goal.

Amazing food culture

If you’re looking to invest in Texas or just travel there periodically to check on your investments, and love good food, then Texas is the state for you. Texas has an excellent reputation for fine restaurants and rich food culture and is home to some of the country’s most outstanding cuisine.

Texas is the culinary Hotspot of America, holding a great variety of flavors all across the state. From succulent Tex Mex to gourmet breakfast tacos from food trucks, there’s something for everyone in Texas. And if you’re looking for seafood straight from the Gulf Coast or mouth-watering mesquite BBQ, look no further!

Conclusion

Texas is a great place to invest in real estate. The market is strong, and there are many options for families and foreigners alike. As the market is booming, there are plenty of options for everyone, from small towns to bustling cities. If you’re looking to purchase property in the Lone Star State, be sure to read this article for all the information you need. Thanks for reading!

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