How to Get US Mortgage for UK Citizens?
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Many individuals long to migrate to another country, live in solitude in the countryside, or reside on a secluded beach. With the USA being the third-largest country in the world, you will never be limited to finding your perfect home during your plans to move there. There are many ways in which your American dream can be realized. Real Estate Property in the US is your best option to go for as a Foreign National, as the USA has a wide range of properties to choose from!
If you’re a UK Citizen and plan to buy real estate in the USA, whether it be residential, commercial, or investment property, this is a definitive guide for you to help do so smoothly.
Table of Contents
Can UK Citizens Obtain a Mortgage Home Loan in the USA?
YES, UK Citizens can obtain a mortgage to buy real estate in the US. The United States of America does not have any legislation that restricts non-citizens from purchasing or owning property in its states and territories, regardless of their nationality. Here is historical data on UK citizens buying property in the US.
| YEAR | # Units Purchased | $ (In Billions) |
| 2010 | 27,100 | $12.1B |
| 2011 | 14,800 | $6.5B |
| 2012 | 12,400 | $4.4B |
| 2013 | 9,400 | $4.1B |
| 2014 | 11,600 | $5.8B |
| 2015 | 8,300 | $3.8B |
| 2016 | 9,200 | $5.5B |
| 2017 | 12,900 | $9.6B |
| 2018 | 9,000 | $7.3B |
| 2019 | 5,200 | $3.8B |
| 2020 | 2,900 | $1.4B |
| 2021 | 3,800 | $2.7B |
If certain conditions are met, UK citizens can acquire financing for a mortgage to buy property in the United States. It’s worth noting that you can get a mortgage to acquire real estate even if you don’t have a credit history in the United States.
Many US-based mortgage lenders would explore alternative and inventive underwriting procedures to provide US mortgage options to UK citizens who have no or little credit history in the United States.
However, owning property in the US does not provide residency rights; therefore, buying property in the US for UK citizens can be a one-step process. If you are not a permanent resident of the United States, you are only allowed to stay for the duration of your visa.
Moreover, investing heavily in American real estate is one way to gain permanent residency and, by extension, full citizenship, and a Green Card.
How Can You Get a Green Card Through Real Estate Investment?
How do Mortgage Loans Work in the USA?
In the United States, the mortgage market is well-developed. However, the market has always operated in a slightly different manner than that of Europe, so if you’re used to the system abroad, you may see some products or phrases that are new. In any case, before you commit to a mortgage and buy property, you need to have a basic understanding of how the various products function to make an informed decision.
The first decision you must make is whether you prefer a fixed or variable rate package.
Fixed-rate mortgages ensure that the same interest rate will be imposed throughout the term of the loan. Until the subprime crisis, it was pretty common in the United States to get a fixed rate for the whole repayment term – that is, up to 30 years.
In contrast, in Europe, such favorable terms are normally only available for a limited time – usually up to five years. In the United States, getting a long fixed rate is more difficult these days, but it is still feasible, but you must meet tight conditions.
How Mortgage differs in the USA from the UK?
The mortgage systems in the United States and the United Kingdom have many overlaps. They’re well-organized, complicated, and trillion-dollar markets. But not entirely; they still differ. So, if you are a resident of the United Kingdom who wishes to buy a property in the United States, keep reading to find out how the mortgage system in the USA might differ from your home country!
1. Interest Rate Differences
In the US, the fixed-rate mortgage system is standard. A fixed-Rate mortgage is a system wherein the interest rate remains constant throughout the loan term, be it 15 or 30 years. People prefer the fixed-rate system as it is more predictable, and people know what they will pay every month.
On the other hand, in the UK, variable-rate mortgages are widely preferred. Variable Rate Mortgages are those in which the interest rate varies with the market, i.e., never constant and keeps changing as the market changes. These can be beneficial if the rate drops.
2. Interest Rate 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.
When compared with the UK, the results are shocking. The respective average mortgage term of the UK is only 3.5 years, and the USA’s is 23.3 years.
3. Credit Scoring Process
In the United Kingdom, lenders utilize the electoral register to obtain and validate your information. In addition, the SSN (Social Security Number), a nine-digit code assigned to every person in the United States, is used to authenticate your identity.
Lenders in the United Kingdom utilize their process to create credit scores and do not rely on agencies, unlike in the United States, where credit agency scores are the most valuable.
Your credit score is a three-digit numerical assessment of your borrower’s reliability. A good credit score indicates that you pay your payments on time, don’t take on excessive debt, and keep a close eye on your expenditures. To qualify for most types of loans, you’ll need a qualifying FICO® Score of at least 620 points. If your credit score is below 620, you should look into an FHA or VA loan.
Please refer to our comprehensive blog on How to Obtain a US Mortgage for Foreign Nationals with No or thin US Credit History for a detailed step-by-step process.
4. Taxing
On the sale of a primary residence, Americans must pay capital gains (the maximum long-term rate is 20%). When the 3.8 percent net investment income tax is added, the overall tax rate for Americans rises to 24 percent.
Surprisingly, UK citizens are exempt from paying any taxes.
5. Broker Services
The pricing of broker services is more transparent in the Uk than in the USA.
Lenders in the United Kingdom quote retail prices, which borrowers can obtain through brokers. These rates are considered public information, and some lenders publicize them in print and on their websites.
On the other hand, lenders in the United States only deliver wholesale prices to the brokers with whom they do business. Brokers then add their markups before giving borrowers retail prices. Lenders never reveal their wholesale rates to the public.
US Mortgages Vs. UK Mortgages
| Mortgage Aspects | In USA | In UK |
| Interest Rate | Fixed-Rate System | Variable Rate System |
| Average Interest Rate Tenure | 23.3 Years | 3.5 Years |
| Credit Scoring | Relies on Credit Agencies | Relies on Electoral Register |
| Taxing | 24% on Primary Residence Sale | No Taxes |
| Broker Service | Retail Prices Quoted | Wholesale Prices Quoted |
What type of Mortgage Can Foreign Nationals get in the US?
The US mortgage system is vast and diverse, so there are many options available for foreign buyers who wish to purchase property in the US. You can either get a conventional loan or explore other avenues such as an investment loan or a hard money loan.
The types of loans that are popular amongst UK Citizens are:
1. FHA Loans
FHA Loans are specialized loans that are simple to obtain and require only a 3.5 percent down payment. Their credit standard characteristics are far more straightforward than those of their traditional counterparts.
2. 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 three years.
According to government guidelines, it is the lender’s responsibility to demonstrate the legal residency of their borrowers, particularly foreign nationals buyers.
A valid visa issued by the INS, as well as an EAD, which can be either an I-765 or an I-766, are required for a VA or conventional loan. A Form I-797A with I-94, or other legal work authorization, may also be required.
3. 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 that you have lived in the United States for at least five years.
A non-conforming Jumbo loan is more difficult to obtain than a VA loan. As a non-US citizen, you must meet the requirements for jumbo loans.
For Jumbo Loans, several requirements must be met:
- 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.
- Either a condo or a house should be used as collateral for the loan.
- You should put down of 20-25% of the purchase price.
As a United Kingdom citizen or foreign national, you must supply the following documents in terms of paperwork for a Jumbo Loan:
- H-2B and H-1B visas
- An EAD in addition to an I-140.
- A valid passport from the nation of your citizenship, as well as a stamped I-94 form, which shows allowed work.
How Can You Qualify for a Mortgage Based on Immigration Status?
Your immigration status will determine the type of loan you are eligible for, as well as the papers required to obtain that loan. Here are three possible scenarios and how people in each can qualify for a loan.
Permanent residents with a green card
You can get the same basic Fannie Mae or FHA loan that U.S. citizens can get if you are a permanent resident with a green card. Your loan application process should be identical to that of any other naturalized citizen, with the exception that the lender will most likely require additional evidence to confirm your residency.
You must, however, meet the loan’s eligibility requirements, which often include two months’ worth of bank statements, two years’ worth of credit history, and two to three years’ worth of tax returns or other proof of income continuity. New residents may discover that they lack sufficient proof that they pay US taxes and earn income in the US.
Temporary Residents with a Work Visa
Even if on a temporary work visa, people working legally in the United States are eligible for the same types of loans as permanent residents and citizens, including FHA loans and down payment assistance. Temporary residents should go through the same application process as citizens or permanent residents.
Lenders may want a letter from your company saying that your work visa will be extended if it’s about to expire in less than a year. New temporary residents, like new permanent residents, may have trouble qualifying for a mortgage since they lack two years of tax returns and credit history in the United States. However, each lender has its own set of conditions.
Foreign Nationals without any Residency
If you don’t have a work visa or permanent residence status (also known as a green card) in the United States, you won’t be able to get a conventional or government-backed loan. You may, however, be eligible for a loan known as a foreign national loan. “You have to establish that you live in another nation to qualify for a foreign loan,” adds Borrero. You must also show that you live in your home country and that your money comes from there.
Foreign national loans differ in that they must be used for an investment property rather than a permanent residence, thus, they are not ideal for foreigners wishing to settle in the United States.
Step by Step Process to Get a Mortgage in the USA as a UK Citizen!
Here are the essential stages involved in getting a mortgage in the United States:
Step 1: Decide whether you want to utilize a Mortgage broker to look into your US mortgage alternatives or use a bank.
Step 2: You could also opt for CIPS (Certified International Property Specialist), a designation for Realtors from the USA and abroad to help you look for your ideal property.
Find the best real estate agent with international expertise
Connect with a local US real estate agent(s) with CIPS designation
Step 3: Find a house that fits your budget and reach an agreement with the seller on a purchase price.
Step 4: Select a mortgage that meets your requirements.
Step 5: Get a mortgage pre-approval by submitting the relevant documents.
Step 6: Request a home inspection to assess the property’s quality and condition.
Step 7: To secure the transaction, pay a deposit and choose a completion date.
Step 8: After you’ve completed the surveys, you’ll be able to ‘finish’ the sale.
Should You Go to a Bank or Connect with a Broker to Get a Mortgage in the USA as a UK citizen?
If you’re a U.K. citizen buying real estate in the U.S., you’ll need to get a mortgage. You may be wondering whether it’s better to go through a bank or use a broker. There are pros and cons to both options. Banks typically have more experience lending to foreign buyers, so they may be a good choice if you’re not sure where to start. However, brokers may have more connections with lenders and may be able to get you a better deal.
Traditionally, UK citizens have used brokers to arrange mortgages for US property purchases. However, in recent years, an increasing number of UK citizens have been going directly to banks to get their mortgages. There are pros and cons to both approaches.
Using a broker can save you time and effort. A good broker will have a wide network of lenders and will be able to quickly find the best mortgage rates for your situation. They will also be able to guide you through the application process and help you negotiate with lenders. However, using a broker can also be expensive. You will usually have to pay the broker a commission, which can add up to several thousand pounds.
Going directly to a bank can be a more straightforward process. You will likely get better rates by going directly to the lender, and you won’t have to pay any commissions. However, it can be more difficult to compare rates and terms from different banks, and the application process can be more complicated. You can also go to an International Mortgage Specialist based in your home country, i.e., in the United Kingdom.
Ultimately, it’s important to compare rates and fees from multiple lenders before making a decision.
What is Fixed and Variable Mortgage Rate?
The majority of loans in the United States are fixed-rate mortgages. This means you’re committed to a single mortgage rate for the life of your loan. You’ll have to remortgage if interest rates decline to take advantage of the scenario.
Variable-rate loans are accessible, but you must ensure that you understand the terms of such a loan.
In the United States, variable-rate loans are known as adjustable-rate mortgages (ARMs), and they are frequently available at lower interest rates than fixed-rate mortgages. The interest rate linked with an ARM, on the other hand, can rise dramatically. You accept the risk of any potential increase in exchange for a low initial rate.
What Type of Fees Would You Be Required To Pay?
To obtain a home mortgage in the United States, you will be required to pay expenses such as administrative and legal costs. The specific expenses will vary based on your circumstances, but it’s a pricey transaction when you put it all together. The fees are usually referred to as closing fees and are bundled into a single bill known as a HUD-1.
You should also anticipate paying the following costs while arranging a home mortgage:
- Application fees range from $20 to $50.
- Fees for appraisals range from $300 to $500.
- Fees for settlements of up to $300
- Title insurance and title fees (variable)
- Fees for recording range from $50 to $150.
- Mortgage guarantee fees typically range from 2% to 3% of the loan value, depending on the program.
Other charges, both in terms of taxes and the price of obtaining the loan, may apply depending on the situation.
What Documents do UK Citizens Need to Get a Property in the US?
The documents you'll need will vary depending on the bank you go with. You can anticipate being asked for the following information:
- Personal identification documents (passport).
- Proof of legal status in the United States as Foreign Nationals.
- Documents proving your creditworthiness (usually an international credit history check, bank statements, proof of your wages, your last three years of tax returns, or a letter from your employer).
- Documents proving the mortgage’s affordability (these might be household cash flow statements, utility bills, or bank statements showing that you can afford the monthly payments)
How is your Credit-Worthiness Assessed by US Mortgage Providers?
Affordability is an important deciding factor in whether or not you’ll be offered a loan. Expect to have to show a maximum debt to income ratio of something like 35% to demonstrate that you can afford to pay back the mortgage even if your circumstances should change.
Sometimes, proving your creditworthiness is difficult if you haven’t been in America for very long. In this case, you may be able to get an international credit history check to verify your records elsewhere.
All of the documents above should be provided to the bank to get a mortgage pre-approval or a mortgage in principle, which means that they agree on how much they would lend you if you find a suitable property.
Tax Implications of buying US Property as a UK Buyer?
A non-resident foreign individual from the United Kingdom is required to pay taxes on all income earned in the United States, including rental income as well as property taxes. (rental income, if any).
UK Citizens are subject to a 30% tax rate that can be reduced, including exemption, if the foreign national’s home country and the United States of America have a tax treaty in place. If the foreign national qualifies for a tax treaty exemption, the amount withheld from payment will be minimal to none. Fortunately, the UK and the US have a tax treaty in place that will assist you in avoiding double taxes.
To know more on the same topic, visit our Ultimate guide for a UK Citizen buying a house in USA.
How To Choose the Best Lender?
Some lenders will make borrowers go through more hoops than others to get a loan, so you can eliminate a lot of headaches by identifying ones that frequently work with non-U.S. citizens. If you’ve done business with an international bank that operates in the US, that’s probably the place to start.
Although many major banks and credit unions in the United States provide mortgage products, not all of them cater to expats, particularly non-residents. Check the small print on the things you’re interested in, as they come with some very tight terms and conditions.
HomeAbroad can help you here to choose the best lender for your mortgage. Not only that, we can help you connect with the CIPS real estate agent to make your purchase and mortgage process effortless.
Find the best real estate agent and mortgage lender with international expertise.
Connect with a local international real estate agent and mortgage lender
What To Do After Obtaining a Mortgage Loan?
After you’ve secured a mortgage, you’ll begin to create equity in one of two methods. A percentage of each mortgage payment will be applied to the principal, lowering the amount owed to your lender. If the value of your home rises, you can develop equity. In either instance, you can get the money you need through a specialized loan.
Because you utilize your equity as security, home equity loans are sometimes known as second mortgages. You will receive a lump sum and will be required to make monthly payments if you obtain a home equity term loan. A home equity line of credit, which gives you access to a revolving account, is another option. This enables you to take money out and repay it over a set length of time.
Frequently Asked Questions
Q1. What are the types of visas that are accepted by lenders for mortgage applications as proof of legal residency?
The types of Visas that are accepted by lenders for mortgage applications are:
- H-1B and other H series visas such as H-1C, H-2, H-3 and H-4
- E series
- G series
- L series
- O series
- NATO series
- Canadian and Mexican NAFTA series
Q2. Do I need to be employed in the United States to qualify for a mortgage?
No, you don’t have to be employed in the United States to qualify for a mortgage. You can qualify for a mortgage as long as you have sufficient income from other sources, such as investments, rental income, etc.
Q3. Do I need to have a Social Security Number (SSN) to apply for a mortgage?
No, you don’t need to have a Social Security Number (SSN) to apply for a mortgage. You can qualify for a mortgage as long as you have a valid US visa that allows you to work in the United States.
Q4. Can you get a green card if you buy a house in the US?
No, you cannot get a green card if you buy a house in the US. However, owning property in the United States can help you qualify for a green card through investment immigration programs.
Q5. Can I use my UK pension to qualify for a mortgage in the US?
Yes, you can use your UK pension to qualify for a mortgage in the US.
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