How Can Indian Citizens Get US Mortgages? [Guide]

At the best of times, navigating the U.S. financial system can be intimidating – credit scores, payback plans, and interest rates can all seem overwhelming. 

This is especially true if you are not a citizen of the United States. For example, are you eligible for loans in the United States if you have a visa? What kind of credit history do you need to show, how much money do you need to make, and do you need a citizen to cosign with you? You’re undoubtedly wondering about all of these things.

Can Indian Citizens Buy Property in the USA?

YES. Due to the lack of a citizenship requirement for real estate sales, Indians can purchase a property in the U.S. In truth, foreigners who meet specific criteria may be eligible for a mortgage. Foreign property owners, however, do have a more difficult tax scenario than U.S. citizens. 

California is the most popular destination for Indian buyers, with 40% of residents choosing to buy there. This is because most working Indians in California are employed and reside in the Silicon Valley region. 70% of Indians invest in suburban areas when purchasing a U.S. property. 15% and 14% of Indians put their money in urban cities and small towns, respectively.

Before buying property in America, it’s essential to understand the tax rules to get the most out of your money.

How Do Mortgage Loans Work in the USA?

The mortgage market in the United States is well-developed. However, the market has continuously operated differently than in India, so if you’re used to the system in another country, you may notice some unfamiliar products or words. In any case, you must understand how the various products work to make an informed selection before committing to a mortgage and purchasing a property. 

It would help to decide whether you want a fixed or variable rate package. 

Fixed-rate mortgages guarantee that the interest rate will remain constant during the loan’s term. Before the subprime crisis, getting a fixed rate for the whole repayment term – up to 30 years – as usual in the United States.

In India, a Mortgage Loan is also popularly known as Home Loan or Property Loan. The Home Loan is a secured loan that requires the borrower to keep collateral with the lender, in which the collateral of the home loan is the home itself for which the loan is borrowed. If a person fails to repay the home loan on time, the lender has the right to acquire the property.

Housing Finance Companies (HFCs) will verify property papers and offer a loan by signing an agreement. There is no need to get a Mortgage registered. This is common in India, but most HFCs ask customers to pledge property documents.

How Mortgage Differs in the USA from India. 

Interest Rate

In the United States, the mortgage rate is currently at 5.13% at a fixed rate. However, it has risen more than 1.5% in the last few months due to tightening financial conditions.

The interest rates in India on mortgage loans range from 8.15% to 11.80% p.a; however, not on a fixed home loan rate.

Loan Tenure

Long-term mortgages are popular among Americans. 15-year and 30-year fixed-rate mortgages are the most common mortgage products. The average maturity age of a mortgage is over 23 years. Because of the popularity of fixed-rate mortgages, Americans like to pay small monthly payments, even if it’s for years. However, the loan term is generally not stretched this long. 

Compared to India, there is not much difference here as a Home Loan repayment can take as long as 30 years.

Credit Score

A good credit score is significant for a home loan, especially if you want to get it at lower interest rates. Banks may either reject an application or lend home loans at higher interest rates to those with poor credit scores. 

In India, CIBIL is one of the four official credit bureaus that provide credit scores in the country, alongside Equifax, Experian, and CRIF High Mark. For a home loan, an excellent CIBIL Score should be 700 or higher. The closer to 900 you are, the greater your chances of being approved for a loan.

On the other hand, in the U.S., to qualify for most types of loans, you’ll need a qualifying FICO® Score of at least 620 points. So if your credit score is below 620, you should consider an FHA or V.A. loan.

Taxing

In India, taxes on property or mortgages work differently than in other countries. Most mortgage payments include a property tax (along with the principal, interest, and homeowners insurance). So if you make your monthly mortgage payments on time, you’ll most likely be paying your property taxes.

In the U.S., state and local governments enforce a mortgage recording tax to document the loan transaction whenever you obtain a mortgage. This fee is separate from mortgage interest and other annual property taxes. Since it is state-imposed, the mortgage recording tax must be paid to the government when you register a mortgage.

Point of Difference	India	U.S.A
Interest Rate	8.15% – 11.80% Per Annum	5.13% at a fixed rate
Loan Tenure	30 Years Maximum	15 Years & 30 Years
Credit Scoring	CIBIL Score – 700 and more	FICO Score – 620 and more
Taxing	Property Tax (Included with monthly mortgage payment)	Tax enforced by State and Local Governments

Qualifying For Mortgage based on Citizenship Status

To get a mortgage in the U.S., you don’t need to be a citizen of the country.

• If you’re a Permanent Resident Alien, you’ll need your green card and social security number. The process of applying for a mortgage will be similar to that of U.S. nationals. 
• Suppose you’re a Non-Permanent Resident Alien who doesn’t have a green card but does have a social security number. In that case, you can use a work visa or a special employer-sponsored visa to finance a home. It’s also helpful if you can guarantee that you’ll be able to stay in the country for at least three years.
• Immigrants who are not citizens or residents but are refugees or have been given asylum can work and seek funding in the same way lawful resident aliens can. To be qualified, people must show that they are refugees or asylees.
• Home loans from Fannie Mae, Freddie Mac, or the Federal Housing Administration are unavailable to non-US residents who reside illegally in the United States. 

What Type Of Mortgage Can Indians Get in the U.S.?

In the United States, there are two types of non-citizen homebuyers: those who want to buy a primary residence and those who want to buy a vacation home. A foreign national mortgage can be used to fund property for any buyer, but the loans are not all the same. You can either get a conventional loan or explore other avenues such as an investment loan or a hard money loan. Some U.S. Mortgages for Indians are: 

FHA Loans

FHA Loans are specialized loans that are simple to obtain and require only a 3.5 percent down payment. As a result, their credit standard characteristics are far more straightforward than their traditional counterparts. 

Conventional Mortgages

Borrowers who use conventional mortgages, such as those offered by Freddie Mac and Fannie Mae must provide their social security number, proof of residency, and proof of income for at least last three years.

According to government guidelines, it is the lender’s responsibility to demonstrate the legal residency of their borrowers, mainly foreign nationals buyers. 

A valid visa issued by the INS and an EAD, either an I-765 or an I-766, is required for a V.A. or conventional loan. In addition, form I-797A with I-94, or other legal work authorization, may also be required.

Jumbo Loans

If you want a standard Jumbo loan, you must demonstrate that you will be employed in the United States for the next three years and have lived there for at least five years. 

A non-conforming Jumbo loan is more difficult to obtain than a V.A. loan. As a non-US citizen, you must meet the requirements for jumbo loans. 

For Jumbo Loans, you must meet several requirements: 

• For a minimum of 5 years, you must have lived in the United States. 
• For the first three years after receiving a loan, you must be able to show consistent employment. 
• A condo or a house should be used as collateral for the loan.
• You should put down 20-25% of the purchase price. 

What are the Documents Required for a Mortgage Approval?

The U.S. Government requires a slew of documents from mortgage appliers, depending on their citizenship status. The records required will be as such:

Non-Resident Living Outside the U.S.

If you’re a Non-resident living outside the U.S., you will be required to provide Indian documents such as:

Tax Documents: Income Tax, Benefit Return, and Notice of Assessment

Investment Income: Last two years of investment slips

Salaried Employees: Last two years of income slips. Paystubs for the past 30 days of income

Self-employed individuals: Last two years of business returns for any entity where ownership is 25% or more, with all pages and schedules

Retired individuals: Most recent retirement awards letters

Proof of citizenship: Copy of passport, Green Card, or a U.S. visa

Proof of identity: Tax Identification Number (PAN)

Permanent or Temporary Residents

Suppose you’re a permanent or temporary resident working and living in the U.S. In that case, you will be required to procure U.S. Documents such as:

Tax Documents: 1040 U.S. Individual Income Tax Return

Investment Income: 1040 Schedule B Interest and Ordinary Dividends, and Schedule D Capital Gains and Losses

Salaried Employees: W2 Wage and Tax Statement of Income

Self Employed individuals: 1040 Schedule C Net Profit or Loss from Business, and 1065 K-1 Partner’s Share of Income, Deductions, Credits, etc.

Retired Individuals: Social Security or Awards Pension letter

Proof of Citizenship: Copy of passport, Green Card, or a U.S. visa

Proof of Identity: Social Security Number

Both Residents and Non Residents of the U.S. would need to provide the following documents: 

Proof of assets: Account statements for the most recent two months per each account you hold

Insurance documents: Current property owners must provide copies of property tax notice and home insurance premiums for each residential property.

Steps To Get a Mortgage in the U.S. as a Foreign National

Purchasing a home in another country can be a complex undertaking. After all, there are a lot of stages and regulations, and you don’t want to make a costly error. 

Here’s a quick breakdown of everything you should think about before buying to help you demystify the process and get the most out of your purchase. 

Step 1: Choose where you wish to buy a house in the United States. 

Step 2: Find a real estate agent who has handled international transactions before, especially with a specialization like CIPS (Certified International Property Specialist). CIPS-certified real estate agents are trained to work with international clientele like Indian residents living in the United States and non-resident Indians wishing to buy a home in the United States.

Step 3: Learn how to work with a Real Estate Agent in the United States. 

Step 4: Recognize your tax condition on the other side of the border. 

Step 5: Start your house hunt by hiring a real estate agent. 

Step 6: Make an offer on the property you like and close on your American dream home. 

Step 7: Conduct a thorough inspection of the property. 

Step 8: Make a purchase agreement with the seller. 

Step 9: Fill out a Title report. 

Step 10: You can also get home financing through a U.S. mortgage lending system. 

Congratulations! You are now ready to take possession of your new home in the United States!

Please see this page for a step-by-step guide on how foreigners can buy a home in the United States.

Where Can You Get an International Mortgage From?

Most typical U.S. banks don’t offer overseas mortgages, but some that specialize in international business do. The other option available to most individuals is to employ a mortgage broker to find a suitable lender. Let’s review some significant points about each choice and some possibilities to consider.

HomeAbroad

As a recent immigrant to the U.S. or a non-resident investor in U.S. real estate, we are a one-stop destination for all your finance and real estate needs.

We can assist you in:

• Purchasing real estate in the United States with minimal disruption,
• Guide you through rental alternatives, and
• Provide access to financial and credit resources, including home loans, regardless of your credit history.

HomeAbroad specializes in providing US mortgages for foreign nationals, including expats, newcomers, and non-resident investors buying primary residences, second homes, or investment property. Get a quote today!

From a Bank

While it’s essential to see if your current bank offers overseas mortgage lending, you should expect the answer to be no. However, this does not rule out the possibility of obtaining an overseas mortgage through a bank. 

Many global banking brands offer foreign services tailored to ex-pats and international investors. These are usually the best places to look for an international mortgage directly from a bank. Here are a few to think about:

• HSBC International
• Standard Chartered International Mortgages

From a Mortgage Broker

Mortgage brokers are experts at putting customers in touch with lenders. Of course, you’ll have to pay the price for the service, but you’ll get better deals and a more comprehensive selection of suppliers. 

Many foreign mortgage brokers specialize in specific locations — for example, connecting customers with lenders in Mexico or Europe. A fast Google search with your region will yield an extensive list of possibilities.

What Indian Buyers of U.S. Real Estate Need to Know

Non-U.S. citizens may find it difficult to pay cash for homes in once-favored locations like New York, Miami, and San Francisco due to rising home prices and a strong currency. As a result, there are more international buyers of residential real estate. Non-U.S. nationals, on the other hand, must consider various aspects and specific disadvantages when applying for a mortgage. This includes additional lender criteria, higher borrowing prices, and a more difficult approval procedure.

• Foreign real estate buyers can’t use Fannie Mae or Freddie Mac loans and are often forced to utilize non-conforming loans with higher interest rates.
• However, foreigners on work visas or green cards can qualify for Fannie Mae or FHA loans.
• Lenders will require a larger down payment from foreign buyers and have stricter lending requirements.
• The mortgage process for non-U.S. citizens also takes longer, while selling a property means higher taxes.

Tax Implications for Indians Buying Property in the U.S.

Most Indians buy their U.S. property for primary residence use, i.e., aiming for homeownership for family use. Suppose you’re buying your property for a primary residence. In that case, you will owe property taxes on your property like any other U.S. citizen. However, you may be able to claim deductions on property tax and mortgage interest in your yearly federal / state tax filing.

Tax implications of selling your primary residence house: 

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

If you are buying a property for investment purposes:

Indian investors of U.S. real estate must pay taxes on any income earned in the U.S. This means they will have to pay taxes on the income from their property (rental income, if any).

Frequently Asked Questions

Q1. What is the Tax Rate for property owned in the U.S.?

In general, income from property in the U.S. that a non-resident alien owns is taxed at a 30% rate if it is not effectively connected with a U.S. trade or business.

Q2. How long can I stay in the U.S. if you own property?

Based on buying a house in the USA, you aren’t granted additional perks like acquiring residency. However, once you have entered the USA on a Visitor/Business (B1/B2 Visa), you can stay up to six months. Other visa statuses have different stay durations.

Q3. Which Visas Are Eligible for Loans in the U.S.?

Usually, the following visa types are acceptable for loan applications. However, keep in mind it varies from lender to lender:

• E-1
• E-2
• H-1B
• H-2A
• H-2B
• H-3
• L-1
• G series
• O-1

Q4. Can Visa Holders Get Loans Without an SSN?

A social security number is a helpful tool in obtaining a loan. It tells the lender that you are less of a flight risk since it indicates you will be present. The lender knows you’ll be around, and they have some method of ensuring you make your repayments.

However, it is possible to acquire a loan without having a social security number. In addition, some non-traditional lenders will give you a loan if you meet their requirements.