In Houston, the majority of residential purchases involve single-family homes.
There are no laws against foreigners purchasing any U.S. property and real estate agents work with any buyer. When paying cash, anyone, even foreigners, can immediately buy anything that is for sale. Most expats wait at least a few years before purchasing a home for two reasons. First, they want to make certain they will stay for a while or want to understand the housing market before investing in a home that may need to be resold in the near future. Secondly, for financing reasons, they will have to build some kind of credit first, unless they have the funds to pay for it in cash.
Purchasing property can be very difficult for an expat during the first years of being in the U.S. if financing is required. Many mortgage brokers make obtaining a loan very difficult, if not impossible, as new arrivals have no U.S. credit history, proof of income or other necessary documentation. The first step is to contact a mortgage broker or a bank.
For a mortgage broker, if there is not a sufficient credit history (such as five or more years with excellent rating), you may require documentation such as references from landlords that rent was paid on time every time, utility bills, pay stubs, letters from your employers’ Human Resources about yearly income, references from friends, copy of the visa, etc. Rates for expats are also generally higher with a mortgage broker, usually around 5 – 6 % and upwards, and a mortgage broker will also request a higher deposit, such as 20 % or more of the purchase price.
The bank where the expat has an account is generally the better option. They may only want to see a copy of the visa and then look at the account history to verify financial responsibility. Deposits are usually less, 10 – 15 % down and rates can be really good at around 4.75 %. Rates mostly depend on income, any credit history and credit rating.
It is important to get a fixed rate loan. The non-fixed loans that banks had been giving out in recent years have contributed to a big flood of bankruptcies due to rate hikes that people are now unable to pay.
Get pre-approved for a home loan before you start shopping for homes, this way you know your price range and once you have chosen to make an offer, the process will be half the time.
So, first it is highly recommended to check with your personal bank and keep mortgage companies as an alternate option as it will be easier to finance through your own bank with which you have established a relationship already. If you don’t have a bank yet, check the Banking section of this guide.
To check if a mortgage broker is reputable, visit:
- Greater Houston Association of Mortgage Brokers – http://www.ghamb.org/
- Houston Mortgage Bankers Association – http://www.houston-mba.com/
Here is a small list of mortgage companies:
- Personal Home Loan Mortgages.com – 877-332-0702 – http://www.personalhomeloanmortgages.com/broker/texas/houston/mortgage_brokers
- Baker Mortgage – 281-313-6683 – http://www.bakermortgage.com
The Purchasing Process
Once you have decided you want to purchase a home, pick an area you want to live in. Get educated about the local real estate market prices and age of homes as well as issues such as future development and flooding. Check for floodplains in the mapping tool on the Harris Flood Control District’s website at http://www.hcfcd.org/.
Then enlist a real estate agent who you can find at the Houston Association of Realtor’s website http://www.har.com/ or note the names and numbers of real estate agents posted in the neighborhood you ave selected. Real estate agents have full rights and are qualified individuals who conduct the entire business. There is no need to hire a separate lawyer unless you have issues with the agent. The agent will try to build a relationship with you on your quest to a new home and can advise about market conditions, risks in the particular area and purchasing strategies. The agent will also guide you through the financial aspects and send you through the pre-approval process of a loan, if you have not done so already, to understand your price range.
The next step will be looking at properties of interest. When a property is found that you are serious about, the real estate agent will work with you on a bid for the property. If there hasn’t been an inspection done on the property, the real estate agent will ask for it at that time and it will be performed by a licensed inspector. You can be present and talk to the inspector during the walk-through which usually lasts several hours. In Houston, you want to check for termites, previous flooding, structural damages, or any other physical defects inside or outside of the home. Based on the findings, the bid will then be placed. If the house requires repairs, that amount will be calculated into the bidding price and set lower. You can also offer earnest money which is to establish an escrow fund with a deposit if it is recommended to do so. Your real estate agent will advise you and guide you through the process if necessary. Some deposits are non-refundable which is contractually determined.
The bid is either accepted or negotiated by the seller. Once a price is agreed upon, the contract is drawn. Most of the time, buyers do not contact a lawyer but only work with their real estate agent who has full authority to conduct the transaction. The real estate agent will also work with you on insuring the property and help you decide whether to include the taxes, insurance or any other costs into the mortgage. It is not recommended to build taxes into the mortgage or an ‘escrow’ as taxes vary according to area and can increase or decrease. This can then lead to a struggle with the company managing the escrow to adjust the amounts.
Once the property is sold to the expat, the buyer may have to get the deed transferred at a title company but the real estate agent can also take care of that process or will walk the buyer through all transactions.