Advice for foreign home buyers

House of Representatives bill H.R. 5072, known as the FHA Reform Act of 2010, has passed the House and been referred to the Senate. As now written, it will require that non-permanent resident aliens have both a Social Security number and be authorized to work in the U.S. to qualify for an FHA loan. It is expected to pass later this year.

What does this mean if you are a foreign home buyer? It means the time is now to take advantage of low rates and great buys before it becomes more difficult for you to buy real estate in the United States.

For every foreigner looking to buy a home, the home-buying process is essentially the same as it is for American citizens: You find a home, make an offer accompanied by a deposit, obtain a mortgage, pay for inspections and appraisals, and—when all contingencies have been removed and the financing is in place—close on the property. There are just a few odds and ends that you need to have lined up if you are a foreign buyer compared to a US citizen.

It's a very straightforward process if you pay all-cash. If you need a mortgage, the process will be a bit more challenging depending on what country you are coming from. If you have diplomatic immunity, forget about the buying process and look for something to rent. Immunity from US laws would prevent lenders from seeking redress should you default on your loan.

Assuming you don't have diplomatic immunity, get your paperwork in order. Expect lenders to ask you to show at least a two-year history of employment and credit history in the U.S. or another country. You'll also have to prove legal residency in the U.S. for at least two years; if you haven't lived here that long, some lenders will accept two bank references instead. While no specific documents are required to prove these things, each lender you talk to will have varying degrees of required paperwork needed to obtain the loan. You also should be prepared to show your passport, a valid visa, and, if you have it, work authorization. As with any loan in today's market, it is best to be 100% prepared prior to beginning the application process.

If you need a jumbo loan to buy a high-end property, lenders are likely to demand at least a 25% down payment and may charge you a higher interest rate than they would an American citizen. But if you're applying for a conforming loan guaranteed by the government-sponsored entities such as Fannie Mae or Freddie Mac, you will have the same access as an American citizen to all of their programs, at the same interest rates, and with the same terms and fees.

You also should investigate Federal Housing Administration loans. Loan limits differ throughout the country, and are lower in less expensive places such as Idaho. Moreover, down payments for borrowers with excellent credit can be as low as 3.5%. But as stated above, act quickly. At this time, you do not have to provide a Social Security number to borrow funds under the FHA program. More information at Black Rock Fine Homes