Currency Converter

Buying a Property In The USA -all you need to know about buying across the pond

Buying a home in the U.S. has always been appealing for British home buyers and investors. Particularly taking into consideration the language and social similarities of our transatlantic cousins along with the bountiful jobs opportunities.

One of the first things you’ll need to consider before acquiring a property is recognising what it will be used for – for holidays, investment or long-term residence?

If you aim for residency in the States, it is worth being aware that simply purchasing a home in the United States will not offer you the right to move to the U.S. To arrange your visa, you should get in touch with an immigration solicitor.

Although you do not need citizenship or a green card to get a residential or commercial property. You will need a Taxpayer Identification Number, a tax-processing number provided to you by the Internal Revenue Service.

Whether you’re chasing after a new job, a loved one or merely the American Dream; the U.S.A. is one of the most preferred locations for Brits abroad. The original, diverse country, America, has a long tradition of welcoming all nationalities and backgrounds and also is a beautiful place to be an expat. It remains the land of opportunity. There are so many benefits to life over the pond.

The property market in America

A few years ago, the biggest challenge associated with buying a home in the U.S. was finding financing, whether a non-resident or a lifelong local. Financing was the most challenging task faced by aspiring investors.

Now the most complicated task faced by want to be owners is finding a property and completing it. Properties in popular cities could have a handful of prospective buyers, and bidding wars are commonplace. Many commentators now believe that the U.S. property market is on the cusp of overheating.

Property inventory in many areas is now at all-time lows, with choice minimal. A trend that is replicated in many other countries, including the U.K. and Canadian property markets.

Year on year property prices across the U.S. is up 15.8%, assisted significantly by record-low mortgage rates and the lack mentioned above of property inventory. Despite the pandemic, the U.S. housing market has remained strong, with the end of the pandemic set to reinforce the U.S. economy combined with millennials reaching homebuying age. The average house price across the U.S. now tops $363,000.

Should you buy or rent in America 

Renting or buying a property in the U.S. are the two main choices when relocating to the U.S. 

Both have pros and cons, and your circumstances, project and budget will define your final choice. 

Life – if you have a stable lifestyle in the U.S. and know where you want to live, buying a house could be worth considering. Naturally, you will need money for a deposit and be sure you can afford any repayments. Typically rental prices and mortgage costs shouldn’t be miles apart. 

Investment- those looking to purchase a home for long term capital appreciation will be pleased by the current performance in the housing market. 

Costs – people wishing to buy a home in the U.S. will have a much larger upfront cost. A significant deposit is required when purchasing a home. When renting a property, a much more modest holding deposit will be required. When the property is vacated, this deposit will be returned minus any reparation costs. 

Maintenance – Renting a property in the U.S. allows a tenant to enjoy maintenance-free living. When owning a home, the maintenance and reparation costs fall solely onto the owner. Newbuilds tend to have warranties, and therefore any faulty construction on new build properties should be covered by the builder. 

Freedom – Rental contracts can be taken for short terms, meaning renting offers you the freedom to leave. The property market is currently buoyant, and it’s feasible you could sell your home quickly and for a profit. If, however, the market returns to normalised levels, selling could take longer. You might be limited to when you can sell due to any mortgage you have on the property. 

Best places to buy in America

Austin, Texas – As an evolving hotspot, the phrase ‘keep Austin weird’ tell you everything you need to know about its eclectic residents. Boasting great restaurants, nightlife and festivals, companies that now operate here include Google and Facebook. The Texan city is now offering something for everyone. The average property price in Austin hit $344,000 in 2020, with the value being found in areas such as Cedar Park and Quail Hollow. 

Savannah, Georgia – Savannah, despite its appeal, remains pretty good value. The cost of living in Savannah is roughly 6% lower than the U.S. average. Incredibly Savannah’s average property price is approximately 4.8% lower than the state average. 

Portland, Maine – Known for its eclectic shops and fresh lobster rolls, there’s lots to love about Portland. On the surface, the city looks quant and unassuming it’s fast becoming a business hub. The sectors that frequent the city include healthcare, media and technology. The average property price in Portland is $424,900. The state runs first time buyer’s programs for those wishing to own their first home. 

Bend, Oregon – The city is forecast to grow significantly. Experts believe Bend will see the second-biggest price appreciation in the U.S. over the next four years. Those that consider relocating will adore its wide-open spaces, hiking trails and boutique breweries. It’s an ideal place to begin or raise a family and great for first-time buyers. The average property price in Bend is $502,000. 

Eureka, California – While often known for its high maintenance population and pricey house prices, Eureka bucks the trend. The average home costing $303,638, this value, combined with its location, Eureka, is nestled between San Fran and Portland. The area provides quaint shops and great restaurant choices. 

Can a foreigner buy a property in America?

Someone who isn’t a U.S. citizen can purchase a property in America. There is no need to be a citizen to buy a home in the U.S. Foreigners also qualify for a non-resident mortgage providing they meet the lender’s requirement. However, the tax scenario can be more challenging than for residents. Understanding the tax rules and implications is vital before deciding to purchase a home in the U.S. 

Costs of buying property in America

There are many buying costs that property buyers should be aware of when purchasing a home or holiday property in the U.S. 

Property purchase deposit – Your home deposit will range from 3- 20% of the property’s value. Non-U.S. residents should expect to deposit 20%. 

Closing property costs – closing costs are fees that are paid to complete a property transaction. These costs are typically divided between the buyer and the seller and will range 2-5% of the home’s value. Buyers will be expected to cost additional inspection fees and appraisal costs. 

Reserve fund – when buying a home in the U.S., the lender will want guarantees that you can afford the mortgage and don’t deplete your entire savings. Therefore, after the costs of buying your home, make sure you have money left in your savings. 

Mortgage insurance – property buyers, will be liable to pay mortgage insurance, buying with deposits inferior to 20%. This insurance protects the lender and will cost roughly 0.2 to 2% of the monthly mortgage payment. 

Newbuild property or resale?

We look at the pros and cons of buying a new build and resale home in America. 

Pro’s of buying a resale property 

Get a discount – resale property buyers are more likely to get a discount on their new property. You can also draw parallels and highlight differences between properties in the same area to get a reduced sale price.

More character – Whilst new builds appeal due to convenience, and many will lack the character of an older resale property. 

Better locations – resale homes will typically be better located than new build homes in a separate development. They will typically be closer to amenities such as schools, restaurants and shops. 

Cons of buying a resale home 

Less choice – when looking at a particular location or type of property, arguably, you’ll have less choice with a resale home. 

Unforeseen repairs – In some cases, your resale property may require repairs that you hadn’t anticipated. Whereas a warranty or guarantee will cover a new build property, repairs on a resale home will be at the new owner’s charge. 

Pros of buying a new build property

Tailor your property – new properties can be customised. You can often choose the fit and finish in most rooms and even arrange for paving to be laid in the garden. 

New home feel – your new home will never have been lived in and will have a lovely brand new feel. You’ll arrive at a fresh, clean home with brand new fixtures, fittings and appliances. 

More efficient – the new appliances in a new home will be much more efficient, and the heating and plumbing systems. 

Builder and developer financing – new builds can often be financed through the developer. Builders finance can be easier than dealing with a typical lender. 

Fewer unforeseen costs – a new build should require minimal improvements or repair, meaning you should only have minimal costs when moving into the property. 

Cons of buying a new build property 

More expensive – New builds can be more costly to buy than a similarly specified resale home in the same area. 

Location more remote – large scale developments tend to be located in more remote areas. This is purely down to the spaced required to develop enough homes to make a project viable. This more rural location often means amenities, transport links, and schools are further away. 

Future property values – future property values are harder to forecast on new build properties. Whilst typically they will follow the trend of the local area there may be less appetite for some recent developments. 

Lacking in character – often described as a ‘cookie-cutter,’ new builds have far less character than resale homes. 

Most expensive areas in America

The most expensive areas in America can be found in some of the best U.S. cities. These are the top 5 most costly locations: 

New York City – leading the pack New York City remains the most expensive location in America. The average property price in N.Y. is $652,012. Living costs are also higher than the U.S. average.

San Francisco – With areas of the city having average property prices of $1.4m, many leave the city and are priced out of the area. Unemployment has also increased in the area following the pandemic touching 7.0%.

San Jose – San Jose finds itself at the centre of a tech hub and is the most desirable location for those working in Silicon Valley. The average property price in the area equating to roughly four times the national average. 

Bethesda – whilst not technically a city location, Bethesda borders Washington DC. Average property prices are roughly five times the U.S. average, costing $1,200,000. 

Brooklyn – the average property price in Brooklyn now stands at $799,000, over three times the U.S. average property price. Its proximity to Manhattan, cool neighbourhoods and art galleries have propelled prices in recent years. The area is a true melting pot with a high level of cultural diversity. 

Least expensive areas in America

A list of the cheapest states to buy property in the U.S.:

South Dakota – South Dakota is located in the Midwest and is the 17th largest area in the U.S. Average property prices in South Dakota are $198,000, with the average square foot price being $124. 

Arkansas – located in the south-central area of the U.S., Arkansas is home to over 3m people and boasts mountainous areas and dense forest. The average house will cost you $200,000, with the cost per square foot totalling $103. 

Ohio – The states biggest city is Columbus, with the state having an overall population of roughly 12m. The average property price in Ohio costs $200,00, with a cost per square foot of $118. 

Missouri – located in the mid-west of America, has an overall population of over six million. The average property price in Missouri is $229,000, with the price per square foot of $130. 

Wisconsin – located in the upper mid-west of America, is the 20th most populated state in the U.S. The average property price in Wisconsin is $233,000, with the price per square foot of $130.

Most popular areas in America with expats

Sarasota – one of the most popular areas for British expats to live in the U.S. Located on the east coast with convenient proximity to the U.K. Florida enjoys year-round sunshine and mild temperatures in winter.

Texas – The state offers various cities which will appeal to expatriates. Austin has a massive tech hub and live music capital of the world. Dallas is also prospering and is considered one of the fastest-growing cities in the U.S. 

Seattle – The city offers a fantastic lifestyle, with the likes of Boeing, Microsoft and Amazon all offering jobs in the city. Seattle doesn’t offer the most fantastic weather and is often known as the emerald city. Summers are long and can be enjoyed in national parks such as Mount Rainer Park.

Denver – Just a few years ago, Denver was voted in the top places to live in the U.S. Located at the base of the Rocky Mountains and is popular with skiers and snowboarders. The atmosphere of the city is young and lively, with the great outdoors never far away.

Portland – Portland has a population of only 67,000 and has many restaurants for its resident to enjoy. Located in New England, Portland is surrounded by breathtaking countryside and coastal locations.

Top tips for those buying America

Find the right location – Do lots of research; hundreds of websites promote properties for sale in your desired area. Note down details on every property that interests you and quiz the selling broker. Make sure you also make a mental note of selling prices in the chosen location on these sites.

Outline your budget and stick to it – knowing your budget and sticking to it is crucial when looking for your dream home. If you reside in the U.S., you’ll need to budget a minimum of 20% of the house value. When financing a property, lenders are typically willing to lend roughly 3 to 5 times your household income. It’s worth knowing your budget and how much you can borrow before choosing an estate agent or broker.

Select your estate agent – the agent will play a critical role when you’re buying or selling a home in the U.S. They can provide accurate insights into market trends and areas which might not be available online. They will help you negotiate and provide all the information needed to complete your U.S. property purchase. The agent will not cost any more to work with – their fee is taken from the house sellers commission charge.

House inspection – you’ll need to get your prospective property purchase accessed by a home appraiser. They will make you aware of any issues and potential costs if you decide to purchase the property. Your agent will be able to arrange the inspection. Suppose any problems are found in the property. In that case, this inspection will allow you to renegotiate the price or look at another option.

Get a mortgage – The U.S. loan market offers several secure and cost-effective ways to purchase a home. Suppose you don’t reside in the U.S., budget for a larger deposit. Many banks have experience in dealing with international clients and will have an appetite to lend to non-residents.

Be aware of property costs – creating a financial plan to be mindful of what your new property will cost you is a great exercise. This plan should include property insurance and taxes. Another cost might consist of a maintenance fund.

Structure your property search – it is worth documenting viable properties in your price range. Notes could include the condition of the neighbourhood, state of surrounding properties, level of traffic etc. It’s also worth knowing the proximity of the amenities and schools your children might study at.

Close the deal – At this stage, all the documents will have to be completed. These will include purchase documents and loan paperwork. It usually takes a couple of days for your loan to be funded to purchase the home.

Financing a home in America

Like many other countries, they are based upon affordability, and lenders will want to ensure the monthly mortgage payment equates to between 25-35% of your gross household income.

Lenders are likely to assess your monthly outgoings to make sure you can make your monthly payments.

Foreigners and non-residents will be expected to lodge a deposit of between 25-35% of the properties value. Mortgages are most likely to be on a repayment basis with terms of between 10 and 30 years available.

Transferring money to buy a property in America

When purchasing a property or second home in the U.S. when based overseas, you’ll need to consider ways of transferring your money. Those holding a different currency to the U.S. dollar will benefit from the services of a foreign exchange broker. 

A broker will assist with payments schedules, advise when mates are favourable and allow you to lock in a rate when the timing is correct. 

If you elect to purchase with a mortgage, a foreign exchange broker can help you set up a regular payment plan or help with ad hoc transfers to top-up your U.S. bank. 

Opening a bank account in America to buy a home

Foreigners looking to purchase a home in the U.S. will need to set up a bank account in the U.S. to buy. The basic requirements in terms of paperwork to open an account are:

  • Valid passport
  • Individual Tax Identification Number
  • Proof of address (less than three months) 
  • Minimum deposit (a few thousand dollars will be needed to open the account

Each institution will have its criteria, and requirements can differ from one bank to another. 

Finding a home in America

For those buyers who are time short or looking for more personalised service, you may wish to enlist the services of a specialist property buying agent. This agent will typically work on a retainer basis and present you with the best options available in your desired area, both “on and off-market”. This consultant will then provide you with property valuation and bidding advice- and assist you with financing and legal matters through to sale completion. Buying agents typically operate at the higher end of the U.S. market on properties over $1,500,000 and profess to negotiate at least their fee off the property’s final sale price. Provide U.S. buyers with access to properties that are not for sale on the U.S. property market. A home finding service is excellent, particularly for those unable to travel due to work obligations or unfamiliar with the American property market and buying process.

The property buying process in America

Select a real estate agent – most U.S. states require that you enlist the services of a real estate agent. Ideally, try to source your agent via recommendation. If this isn’t a possible site like realtor.com will be able to guide you towards a reputable agent in the area. When selecting your agent, make sure their credentials stack up and a decent client list. Ideally, arrange a meeting or video call and interview them.

Buyer agency agreement – once you have chosen the realtor you want to work with, you’ll need to sign a property buyers’ agreement with them. This agreement highlights your expectations and sets out your time frame clearly to the agent. If things don’t shape up well, the agreement can be cancelled by either party at any time.

Get a mortgage broker – it’s worth delving into financing options for a mortgage broker at this stage. They can provide you with personal credit, which hands you a critical advantage when dealing with banks. Once this credit report is generated and the numbers stack up, you can move to the point of getting pre-qualified for your house mortgage.  

Getting your property search underway – The best way to start the search is to make a list of requirements, including non-negotiable and negotiable requirements. Also, set a low and high budget, the number of rooms, spec of kitchen and bathrooms you want. When using a realtor, you can pass on your requirements, and they will perform the search on your behalf and present you with suitable properties.

Find a home – once you or your realtor have found a list of suitable homes, you can begin to view the properties. Once you have found a house and want to make an offer, your agent can seek the property’s price history and perform a comparable market analysis, therefore confirming your bid is accurate. Once the proposal is approved as fair or accurate, the realtor can submit the written offer to then submitted. At this point, the vendor may counter your offer or accept your offer. Once your offer or second submitted offer is accepted, the contract is ratified. The buying process moves to the next stage.

Contract approved – once both parties ratify the agreement, the buyer can initiate the home inspection. This contract will highlight any issues or potential problems to budget for. The assessment typically takes place two weeks after the agreement is ratified, and the inspection price is divided between the buyer and seller. Any issues raised will then lead to a renegotiation of the sale price.  

Finally, good luck with your U.S. property purchase and enjoy your second home or new life in the states.

Foreign Exchange Live
Related:  Buy a Property in France: everything you need to know
Foreign Exchange Live
FOREIGN EXCHANGE LIVE