There’s a nostalgic feeling one gets when they are buying a house for the first time despite just moving to the US less than ten years ago. The dream of both immigrants and citizens is to own a home after years of renting.
However, new immigrants tend to experience certain problems when buying a house for the first time. Some hurdles that they face include establishing credit history, adhering to local regulations, language barriers, limited knowledge of the housing market, and securing a down payment.
These problems have delayed some new immigrants who wish to own a home at a specific time, and for others, problems tend to arise after the purchase has been made.
However, all these can be avoided if an immigrant knows the essential things to consider when buying his/her new home. To help you out, we will be listing and explaining ten important points that will help you go through the buying process confidently while avoiding costly mistakes.
10 Essential Things to Consider When Buying Your First Home as a New Immigrant
1. Building Credit History
2. Understanding Mortgage Options for Immigrants
3. Financial Planning and Budgeting
4. Finding a Real Estate Agent Who Understands Your Needs
5. Navigating the Home Buying Process
6. Choosing the Right Neighbourhood
7. Understanding Property Taxes and Homewner’s Insurance
8. Seeking Legal Advice
9. Cultural Adjustment and Community Integration
10. Utilizing Immigrant Resources
Building Credit History
The first time you move to the United States, the first thing you should do is make a conscious effort to build a good credit history. Credit history determines your credit score and that is what creditors consider when deciding whether to lend you money.
The credit bureau creates your credit history which usually contains your payment history, credit utilization, new credit, credit mix, and length of credit history.
Having a good credit score is important because it shows that you have a habit of paying your debts on time and will mostly do the same when given a mortgage.
To build a good credit history, you need to get a secured card for people new to credit or get an offer from a friend or family with good credit, and become an authorized user.
Open a local bank account and get a non-prepaid cell phone to establish your credit profile. Pay all your bills (credit card balance, rent, utility, etc) on time, stay out of debts and avoid maxing out your credit card.
Understanding Mortgage Options for Immigrants
If your credit history looks good enough, then you can think about getting a mortgage. As a new immigrant, you are allowed to take out a mortgage whether you have a green card or not.
Nevertheless, the loan options available to you are quite different from those available to a citizen and they include conventional loans, non-qualified mortgages, Foreign National Loan programs, ITIN loans, DSCR loans and the FHA loans.
FHA loan is a mortgage insured by the Federal Housing Administration (FHA) that allows people with lower credit to buy a house. People mostly go for it because it allows less than the standard 20% payment and the lenders are insured in case the borrower defaults on payment.On the flip side, it demands a funding fee that involves monthly insurance premium and an upfront premium.
Conventional loan is the most common type of mortgage and is financed by private lenders. The loan has two different types - conforming loan that follows the guidelines set by Federal Housing Financing Agency (FHFA) and non-conforming loan that does not.To get a mortgage, you must have had a stable income for at least two years which is also expected to continue for another three years or more. Then you need to have a debt-to-income ratio of 43% or less and a monthly debt payment that is manageable.
As mentioned earlier, you need to have a high credit score or one that at least meets the requirements of the loan program. Depending on the type of loan you wish to get, you will also need to meet additional requirements set by the lender.
If you have met the income, debit and credit requirement, then you will be required to make a down payment (the amount is determined by the loan type).
The documents you need to present to be approved for a loan includes:
• A completed Uniform Residential Loan Application.
• W-2 Forms
• Pay Stubs
• Income Tax Returns
• Alimony or Child Support Documents
• Bank Statements
• Account statement from your retirement and investments accounts (if you intend to use those accounts)
• Signed copy of the purchase and sale agreement
• Rental payment history and references
• Divorce decree (if you are divorced)
• Bankruptcy or foreclosure records
• Valid ID for non-citizens such as a copy of your green card, employment authorization, or an approved visa (to show your immigration status or that you are a permanent resident)
It is wise to compare loan offers from multiple lenders to find the best possible loan terms especially if you intend to save money interest rates, fees and loan costs.
Financial Planning and Budgeting
While the idea of finally owning a home seems very appealing, you should not get carried away. You should set a realistic budget that allows you to buy a house you can afford while spending what is approved.
Depending on the type of loan you are taking out, you have to make a certain percentage of down payment and have a certain level of credit score.
Instead of going above your budget, you can ask for a down payment assistance (DPA). A DPA comes informed of a grant, deferred payment or loan interest loan.
First-time home buyers, people with low to moderate incomes, people with decent credit scores and repeat buyers who qualify can get a DPA.
Finding a Real Estate Agent Who Understands Your Needs
As a new immigrant, you may meet people who wouldn’t mind taking advantage of your ignorance. To avoid that, you should look for a real estate agent experienced in assisting immigrants.
Because they are knowledgeable about market values, they will help you negotiate a good deal on a home and avoid overpaying.
To find a reputable real estate agent who understands cultural nuances and language needs, you can ask for referrals from family, friends, mortgage lenders and online reviews.
Make a list of several real estate agents and check if they belong to the National Association of Realtors, then interview them to know their expertise and local market knowledge.
Navigating the Home Buying Process
You can own a home in ten simple steps - prepare, get pre-approved, find a home, find a real estate agent, make an offer, negotiate, get financing, get inspections and an appraisal, sign documents and pay closing costs, then move into your home.
If you want to negotiate a good offer, you have to be confident and prepared. Be willing to compromise but also prepared to walk away if you don’t like the offer.
Request a home inspection and go with an expert that will uncover hidden issues and provide negotiation leverage.
Choosing the Right Neighbourhood
When buying a home, it is important to do so in the right neighbourhood. Depending on your status, there are things you should consider like crime rates, amenities, lifestyle, commutes, real estate appraisal, safety, etc.
Whether you are buying the home for personal use or commercial purposes, you need to visit the potential neighbourhood at different times of day to do proper research.
Understanding Property Taxes and Homewner’s Insurance
Once you become a homeowner, you will start paying property tax levied by the local government.
The tax is calculated:
Property tax = Market value of the property x assessment ratio x tax rate
You also have to pay homeowner’s insurance to protect your home, assets and belongings in case of damage, injuries on your property or natural disasters.
Seeking Legal Advice
Owning a home is a big leap for anyone, especially new immigrants. Because it’s their first time on such a journey, it is advisable to work with a real estate attorney who can help you avoid legal issues.
They can help you protect your investment and make sure that your home-buying process goes as smoothly as possible. They also carry out deep research on the property you want to buy to ensure that there are no legal issues.
They read in-between lines in contracts to ensure that you are not signing anything unfavourable.
Cultural Adjustment and Community Integration
The excitement of buying a new home does not cancel the nostalgic feeling of moving to a new country or starting a new routine.
It will take some time to get used to the new way of doing things - new neighbors, schools, laws, regulations, faces, etc. You will need to build genuine connections because someone needs to direct you to where the neighbourhood store is.
Utilizing Immigrant Resources
You need to be aware of resources available to immigrants and how to use them to your advantage. Such resources could include community centers, non-profit organizations, and government agencies.
