The United States is a country with favorable mortgage lending, both for the Americans themselves and for foreign citizens. Low interest rates, loyalty to potential customers and the development of the country’s economy are the factors that determine the high demand for mortgages. Let us consider in more detail what features a mortgage has in the United States and under what conditions Russians can issue it.
- 1 Features of mortgage lending in the United States
- 2 What are mortgage programs and banks?
- 2.1 For Russians and other foreigners
- 3 US interest rate
- 4 Conditions for obtaining a mortgage
- 5 Required package of documents
- 6 Making mortgages step by step
Features of mortgage lending in the United States
Mortgage lending in the United States has its own nuances and limitations in comparison with Russian ones. The key features of the mortgage here include:
- Loyal attitude of the absolute majority of banks to borrowers (especially to US citizens).
In America, there is a program to stimulate the construction of residential real estate and increase mortgage lending. Therefore, credit institutions often go to meet customers when considering applications and issue loans for both the purchase of finished and the purchase of housing under construction.
- Providing a mortgage loan with a floating interest rate.
Mortgage programs offered by US banks are mostly issued at floating interest rates, the value of which varies depending on the quality of borrowers’ performance of their obligations. This allows banks to increase their income, and for customers has certain disadvantages, among which are constantly changing monthly payments.
- Accounting for not only the official income of a potential borrower, but also personal savings.
When reviewing a loan application, all banks in the United States take into account not only its official salary, but also additional income, as well as pension and bank savings, investments in securities, etc.
Important! The US banking sector is highly competitive, which helps customers to offer minimum interest rates and the prevalence of mortgages.
What are the mortgage programs and banks
To solve the housing problem and improve the current living conditions, potential borrowers are offered a whole range of mortgage programs, each of which is aimed at a specific category of clients and has unique conditions.
Currently in America you can get a mortgage using the following programs:
- mortgage to support the low-income population and construction companies (The Homeownership Pool) – operates in the state of Florida and allows people with low incomes to receive a soft loan to buy housing from the established list;
- Home Equity Conversion (Home Equity Conversion) is a reverse, non-performing mortgage, through which pensioners can get a lifetime loan secured by existing real estate while retaining ownership rights;
- mortgage for disaster victims (Mortgage Insurance for disaster victims section) – a program that can be used by any person whose home was destroyed as a result of a natural disaster or other disaster;
- a mortgage program for customers using energy-saving devices (Rehabilitation Mortgage Insurance) in their homes – such a loan is issued on favorable terms and at low interest rates;
- refinancing program.
Among the banks issuing mortgage loans are Bank of America, JPMorgan Chase, Wells Fargo, First Republic Bank, City Bank of New York, Mellon and others.
For Russians and other foreigners
Citizens of foreign countries, including Russians, get a mortgage in the United States is not easy. It is connected with the policy of support by the American authorities and commercial structures, first of all, of their population and general distrust towards non-residents.
However, there is no final ban on issuing mortgage loans for foreigners. This can be done, but with certain difficulties and restrictions on the part of banks.
A citizen of the Russian Federation will be able to count on a mortgage in the United States if there are the following factors that increase the likelihood of approval of the application:
- the presence of a letter of trust from a large European bank that will be able to confirm the reputation and reliability of the client;
- a one-time payment of at least 30-40% of the market value of the acquired house / apartment;
- interest increases (the rate in the United States for foreigners will be significantly higher than for its citizens).
Some banks offer special mortgage products for foreigners, providing for the issuance of borrowed funds for a period of 30 years with a fixed interest rate for the initial loan period (usually 5 years).
US interest rate
Credit institutions offer local people a mortgage of 3.5–7% per year. For foreigners, the rates will be higher in order to minimize the possible risks of debt repayment and the return of the borrower to their homeland.
On average, a Russian can expect to receive a mortgage loan with an interest rate of at least 5% per annum. Some banks lend to Russian citizens and other foreigners at 8-9% per year.
The final interest rate will be announced to a specific client after studying the documents submitted and its solvency.
The country’s largest bank, Bank of America, provides loans to US citizens at 3.75 – 4.4% per year (the rate will depend on the type of interest (floating or fixed) and the loan period. For foreigners, this range will increase by about 2 pp and will be about 5.75 – 6.4%.
Attention! US banks consider each mortgage application individually, offering each client unique conditions and rates.
The average value of mortgage loans for foreign citizens today is about 100-150 thousand dollars. Everyone draws up a loan in proportion to their income.
Be sure to pay the first installment, the size of which is on average equal to 40% of the cost of housing. Some banks request 30%, others – at least 50%. It all depends on the borrower, his creditworthiness and financial reputation.
As for the loan term, here the client can choose a suitable period for repayment of the debt – from 15 to 30 years. Most borrowers try to arrange a loan for a maximum period in order to reduce the value of the monthly payment. Short periods are practically not common, as they reduce the income of banks.
A prerequisite for issuing a mortgage loan in America is to purchase insurance against unforeseen situations and natural disasters, including fires, floods, explosions, etc.
Early repayment is allowed without any penalties.
A foreigner applying for a mortgage must meet the following requirements:
- age limit – from 25 to 75 years;
- availability of social securities;
- a work visa / green card or residence permit;
- no negative credit history;
- the presence of a valid bank account in the United States with the placement on it of an amount equal to at least 12 monthly payments on the mortgage loan.
In addition to the above conditions for issuing a mortgage, it is important to mention the need to pay a commission to the bank in the amount of 3% of the loan amount for the provision of services. A specific amount together with a 12-fold monthly payment and an initial payment must be transferred to your bank account.
Required package of documents
For registration of a mortgage in the United States will need the following paper:
- Valid international passport (+ copy).
- Completed application form.
- A document confirming the right to stay in the United States (green card or work visa).
- Social Security number.
- Help with the work of income over the past 3 years.
- Bank statement with a reflection of the movement of funds on the account.
- A letter of recommendation from any large bank (if you can get).
- A copy of the contract of sale with the seller of real estate.
- Letter from NBKI about the quality of credit history.
All documents must be translated into English and notarized.
If a potential borrower provides a letter of recommendation from a large bank, the bank in the United States will soften the requirements for it and significantly reduce the time to consider the application.
Step by step mortgage
The process of obtaining a mortgage by Russian citizens in America includes the following steps:
- Search for a suitable property (using private ads or intermediaries).
- Preparation of a set of documents.
- Opening an account and its replenishment.
- Analysis of banking programs and offers (with the help of a banking consultant and a mortgage calculator, it is important to make preliminary calculations and choose the most profitable option).
- Conclusion of the preliminary contract of sale (it is necessary to specify in it the deadline for receipt of the final amount by the seller).
- Submission of documents and loan application to the selected bank.
- Conclusion of a mortgage agreement and legal registration of the transaction.
Additional costs will be required to lay the cost of insurance (1-3% of the loan amount), a bank fee (about 3%), a fee for real estate valuation and monitoring of the property (about $ 150 per year).
On average, US banks consider applications for mortgage loans for about one month.
Mortgage in America is available not only to its citizens, but also to Russians who have a green card or work visa. A non-resident will be able to get a mortgage for the purchase of finished or under construction housing at 5-9% per annum for a period of 15-30 years with the condition of payment of the initial payment of at least 30%. The final lending conditions depend on the client’s creditworthiness, his reputation and requests for the loan itself.
You will also be interested to know how mortgages are issued in Germany and Spain for the Russians .
We are waiting for your questions.
Please share your experience in obtaining a mortgage in the United States. What difficulties encountered. Write your feedback in the comments.
Also, our mortgage specialist is always on line to help prepare all the documents for obtaining a mortgage abroad. Just sign up for a consultation in a special form.