BY Thomas Simonney & Marco Mavilla Bank of the West

Mar 14th 2021

International Perspectives

10 Ways Home Buying Is Different in the US: What Every Expat Should Know

Mar 14th 2021

So you’re an international expat who wants to buy a house in the United States.  You’re not alone.

The National Association of Realtors says expats bought 183,000 residential properties in the United States in 2019, the most recent year for which statistics are available. Expat buyers come from all over, but most often from China, Canada, India, Mexico, and Europe—specifically the UK, France, and Germany.

While you don’t have to be a US citizen to buy property here, a little American homebuyer know-how will help you through the process. If you’re new to the US, you may be surprised by the differences in the home buying process here versus elsewhere in the world. At Bank of the West, we’ve helped hundreds of expats buy houses in cities like Los Angeles, Denver, and San Francisco—so we know all about the potential for culture shock.

Here are some of the ways home buying is different in the US:

  1. You’ll need to establish a credit history

    In America, a credit history is important because it can help you get better terms on a mortgage. With a good credit score, you’ll be able to put less money down and get a better interest rate. As an expat, you likely won’t have a credit score yet. We can support you with our unique offerings, and help you establish a credit history by setting you up with a credit card, and maybe an auto loan. We even offer a mortgage solution without a credit score. However, it is possible to establish a very good credit score in 18 months to two years.

  2. MLS can make finding a house easier

    In many countries, there is no central listing service where you can see all the properties for sale in an area. Listings are with individual agents, so finding a house you like can take longer. In the US, you can see nearly every house available for sale in the entire country by browsing the MLS, or multiple listing service. Full access requires a real estate license, so while there are workarounds, it’s easiest to work with your real estate agent to do this. Most MLS homes do appear on sites like Zillow within a few days of listing, but agent access is even more important in fast-moving markets where homes can receive offers the day they hit MLS.

  3. US real estate pricing is different

    In the US, the price of a house in the listing is often the minimum the buyer will accept (though offers below asking price aren’t unusual in some markets). This is the opposite of Europe, where the listed price is the maximum. That makes a very big difference when you’re browsing listings with your budget in mind. It also means that in hot real estate markets, you may need to offer more than the asking price to get the house.

  4. You should get pre-approved for a mortgage before you shop

    In the United States, it’s smart to get pre-approved for a mortgage before you start looking at houses. First, it helps you know your budget. But more importantly, it makes your home offer stronger. When you make an offer, most sellers want you to provide proof of financing (or of your ability to pay cash, if that’s your lucky situation). Your mortgage pre-approval gives them confidence that you can afford your offer. In some other countries, you might not get approved for a mortgage until much later in the real estate deal.

  5. Mortgage rates are higher in the US

    In Europe, mortgage rates are generally significantly lower than what they average here in the US, even during this period of historically low rates. That’s something you’ll want to keep in mind when setting your home buying budget.

  6. Property taxes are deductible

    Property taxes are generally deductible from your income tax in the United States. That means you may be able to lower your income taxes by buying a house, which offsets the pain of higher interest rates. That’s not the case in many other countries. There’s no advantage to have a mortgage in some European countries for tax purposes. But in the US, owning a house often makes sense as part of an overall financial strategy.

  7. US Mortgages tend toward 15- or 30-year terms and a fixed rate

    Here’s one that varies widely from country to country. In Sweden, you can take up to 50 years to pay off a mortgage, and you may refinance every three to five years. In Spain, you’re likely to pay a variable rate for 25 to 30 years. Here in the US, we’re somewhere in the middle. Many mortgages have a fixed rate, and you’ll choose a term that can vary, often from 15 to 30 years. Another option is an adjustable-rate mortgage, or ARM, which usually has a set interest rate at first (for anywhere from a few months to 10 years), and then the rate will vary based on an index for the remainder of the loan.

  8. You’ll need to have a chunk of cash in the bank

    You’ll need more cash to buy a property in the US than you would back home. In Europe, it’s common for a homeowner to finance 100 percent of their home purchase value. In the US, citizens generally put 20 percent down or less, but expats typically pay more. You’ll likely need to make a down payment of 30 to 40 percent of the home’s purchase price.

    You’ll also need enough cash in the bank to pay your mortgage for six months to a year. There’s not as much job security in the United States as in some other countries, so even if you know your job is secure, you will need to show the bank that you can make your mortgage payments, even if you lose your job.

  9. Property appraisals can make or break the deal

    In the US, a property appraisal will happen after the seller accepts your offer and before the deal is finalized. If the house doesn’t appraise to the price you offered, you’ll have to make up the difference in cash or renegotiate your offer. Property appraisals benefit you because they help you know the true market value of the home you’re about to buy before you finalize the deal, which can prevent you from overpaying.

  10. There are two real estate agents in the deal

    In the US, sellers and buyers each have their own real estate agent. In some countries, there is just one agent in the deal, the seller’s agent. Having a buyer’s agent means you have an advocate working for your best interests and an ally who will help you navigate the cultural nuances here in the US. And unlike in some countries, where the buyer pays all the fees, in the US, the seller generally pays the real estate agent fees.

At Bank of the West, we can help you buy a house in the US and advise you on how to fit the purchase into your overall financial plan. Our team of international wealth professionals understand the needs of expats living in the US and can put together a comprehensive approach to realizing your American homeownership dream.

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