Uprooting your life and moving from your home country to America can seem like an impossible challenge with endless questions. According to the National Association of Realtors, in the United States, foreign buyers make up a considerable percentage of buyers, totaling more than $54 billion in sales between 2020 and 2021. If you are one of the many foreign buyers looking to plant your roots in Texas, this article is for you! During this article, we will review the basics of the American real estate market and some tips and tricks we have learned along the way.
How do Real Estate Purchases Work in the United States?
To purchase a property in the United States, you first need to understand the basics of how the American real estate market operates. The following gives an example of how real estate transactions develop in Texas.
Brokerage Fees and Commissions
In most countries, maybe even the one you are coming from, it is normal and expected to pay a fee to have a real estate agent helping you in your home search and during the contract process. In The United States and throughout Texas, the commission to the agent(s) is most cases paid by the seller of the property and then divided between the buyer’s agent and the seller’s agent.
Agent Education Requirements
Real estate agents and brokers must have a license and meet education requirements to operate their businesses. Both the state and federal governments closely regulate this.
Multiple Listings Service or MLS
In Texas, the MLS system is used by agents and prospective buyers to access information provided to sites such as Realtor.com, Zillow, and Trulia. Agents share data to MLS then that information is transmitted to the consumer sites noted above.
Who Do You Need to Connect With and Why?
Finding Your Agent
According to realtor.com, more than half of all recent homebuyers first found their home through the internet on a listings site like realtor.com®, nearly all (9 in 10) purchased their home through a real estate agent. Finding an agent that you connect with is a big deal. You will be working with this agent for months and want to make sure they understand you and your needs. Oftentimes, interviewing your top choices and picking one agent is the best option. Building that solid connection makes it easier for your agent to find your perfect home faster!
Connecting with a Lender
After choosing an agent, selecting a lender is the next most vital step you can make. The biggest lender isn’t always the best option when it comes to lending. Customer service, locality, and experience matter as well. Speak with your agent to see if there is a particular local lender that they love to work with, who closes on time, is friendly, and has excellent reviews. To purchase a property within the United States, you will need to connect with a lender or financial institution to assist you with the loan or processing your cash payment to the home.
Calculating the Cost – Money Breakdown
Save for a Down Payment
Do first-time homebuyers need a down payment? If so, how much? This varies by situation and area. Your down payment will ultimately depend on what type of mortgage you and your lender settle on and how good your credit score is. Down payments can be as little as 3% of your total purchase price up to 20% in a traditional loan. You can speak to your lender or real estate agent about first-time home buyer loans and first-time homebuyer programs to see if you qualify.
Get a Preapproval Letter
Getting a preapproval letter from the mortgage institution you are working with is vital in this market. The letter is provided by your loan office stating that you are prequalified to purchase a home up to a specific price. A preapproval letter lets your real estate agent and other agents representing the sellers know that you are a serious buyer.
Earnest Deposit(s) and Down Payments
Increasing your down payment or increasing the amount of earnest money you provide shows everyone that you’re serious and that this is something you truly want. This can be something that a seller would favor over a lower down payment. If you’re in the situation to do so, a 100% cash offer will help you stand out even more above the rest of the offers. This gives sellers the guarantee that your offer will go through and not have financing issues.
What are Closing Costs?
Closing costs are made up of the fees associated with buying your home and paid at closing. The charges are made up of fees relating to the mortgage, including the appraisal, title work, paperwork, attorney fees, and the expense of underwriting your loan. These closing costs can be paid at the closing table by check and are separate from your down payment or earnest deposit.
How are the Closing Cost Fees Calculated?
Typically, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees, with the average buyer paying roughly $3,700 in closing fees, according to a recent survey https://www.bankrate.com. These costs vary widely from city to city and between states as the average costs of homes look very different depending on the region that you live in. Your lender will be able to give you a rough estimate on what your closing costs will be once your offer gets accepted and your loan begins processing, so there are no surprises at the closing table. As mentioned at the beginning of the article, days before the closing, your lender will provide you with a draft copy of the closing disclosure statement, which outlines fees and final payments due.
How Much Should You Plan on Saving?
This depends on what your home budget is. Take your projected home price and plan on saving at least the additional 5%, if not more; that way, you have extra money for other things that might pop up before closing, like buying a new couch or upgrading the security system.
What Is A Mortgage Loan Origination Fee?
By definition, it is the fee that lenders charge for originating or creating and processing your home loan and all that comes along with that process. The fee covers many services that the lender provides, such as processing, underwriting, and other staff involvement. Some lenders will break the charges down for you to show exactly which process is being charged.
Total origination charges will breakdown from your lender:
- Courier fee
- Document preparation fee
- Processing fees
- Tax service processing fee
- Underwriting fees
When Do You Pay for the Mortgage Origination Fee?
Typically, this fee is paid alongside the down payment and any other closing costs at the closing of your home. Your lender will reach out to you and let you know how much you owe and then request the payment in the form of a cashier’s check or wire transfer. Many lenders allow borrowers to roll closing costs and the origination fee into the overall price of the loan, which can be an appealing option for young first-time buyers.
What do You Need to Buy a Property in the United States as a Non-Citizen?
- social security number or Individual Taxpayer Identification Number
- valid foreign passport, a U.S. visa, or a valid driver’s license
- bank statements
- proof of reserves from your bank
- pay stubs from your current employer
Should You Purchase the Property in Your Name?
Foreign investors and owners can purchase a home or other property directly in your name or through a business entity, like a domestic corporation or limited partnership. Speak with your agent to see which choice might be right for you.
Can You Pay Cash for Your Property?
Yes, all-cash purchases of property are allowed in the United States, although the government does mandate that all cash transactions over $10,000 be reported.
Understand Closing Time Frames
Once you are under contract with your future home, your agent will be your most valuable guide in the next few months. Keep in mind that the time frame from offer acceptance to closing is different in every situation. Typically, it is about 30-40 days from start to finish. Consult with your agent for a list of deadlines and other important dates in your contract.
When Does the Final Walkthrough Happen?
The final walkthrough happens just before the closing of your home. Typically, they take place the day before or the day of closing. They happen so close to closing that you have time to go through the home right before you buy it to make sure nothing is out of place. If they happened weeks before the closing, there could be time for damage to occur at the home. Conducting the walkthrough as close to closing is vital if you find something wrong with the house.
Once that is completed, you will receive a closing date, time, and location of where the final loan documents and deed will be signed by both you as the buyer and the seller to finalize the sale of the property. You do not need to attend this closing in person if prior arrangements have been made; this includes appointing a power of attorney or signing the documents then delivering them via overnight shipping.
Homeownership in Texas
With Beyond 404 Realty, Anthoney Hanks helps families and individuals in the Dallas-Fort Worth community find their dream home. Anthony specializes in working with first-time homebuyers in Texas and those looking to purchase investment properties in Texas. Anthoney will teach you how to become a homeowner, stop renting, and start buying! Visit www.beyond404realty.com for more information or visit our youtube page for short videos on starting the home buying process at https://www.youtube.com/channel/UCmzTlxpC6-nJWXsphoqhPZw We can’t wait to work with you.
