Posts Tagged ‘Mortgages for Foreign Persons’

Foreign Nationals…Buying Property in Tucson, Arizona

Tuesday, August 26th, 2008

    The exchange rate of the U.S. dollar to foreign currencies, combined with the decrease in prices here in Tucson, Arizona makes real estate a very attractive bargain for people outside of the United States. 

    Many Canadians are taking advantage of the “bargain hunting” as well as Germans.   The weak dollar compared to other currencies offers nearly a 40% reduction in price and that combined with an approximate 10 to 20% decrease in price makes real estate prices for Foreign Nationals 50% to 60% less than in 2005-2006.

    With the mortgage debacle also comes some new rules.  Formerly, Foreign Nationals could put 30% down on a property with no questions asked and get a loan for the remaining 70% of the purchase price.  Today however, the rules have changed.

     Countrywide will do  conventional financing for a Foreign National with a K1 or K3 Visa if that person has a Social Security number.  If there is no Social Security number, Wachovia and Washington Federal require that the buyer put 40% of the purchase price down and document assets and verify employment.  There is not verification of income.  

     Verification of assets is generally providing two months of bank statements to the lender.  Potential buyers who have a Green Card or a work Visa would have a social security number and can apply for an FHA or Conventional Loan.   Proof that the buyer has applied for US citizenship is also required.

     The process is essentially the same for a US citizen obtaining a loan for a home as well as a Foreign National.  Foreign Nationals paying cash must show the audit trail of the cash, just like a US citizen.  This requirement falls within the money laundering legislation.  The cash would be in the form of a certified check or a cashier’s check.   Actual cash is unacceptable.

    When a Foreign National sells a home in the United States the Foreign Investment in Real Property Tax Act (FIRPTA) applies.  A total of 10% of the Gross Sales price is withheld by the Escrow Office for potential taxes owed to the Internal Revenue Service if the sales price of the home exceeds $300,000.   It is important to note that the responsibility falls to the Buyer to ascertain that the 10% has been withheld.

    Many Foreign Nationals work with tax accountants or tax attorneys who may request information from the Internal Revenue Service regarding the maximum amount of tax liability which may be owed by the seller.   This may be less than the 10% and documentation would be needed from the Internal Revenue Service.

     Persons from outside of the United States do not have to use the lenders mentioned in this article.   They can use a mortgage broker or banker who can find the best product for their situation.

Resources:  Internal Revenue Service:

http://www.irs.gov/businesses/small/international/article/0,,id=105000,00.html

http://www.irs.gov/pub/irs-utl/firpta.pdf

http://www.firpta.com/home

http://telestalk.telesproperties.com/2008/08/06/federal-housing-bill-now-law-including-firpta-fix/

http://www.aaronline.com/documents/firpta.aspx