So you're thinking about buying a home in the US? Congrats! That's quite a milestone. Before diving headfirst into the US home buying experience, learn the basics of purchasing US property as an Australian expat. And discover the differences between buying a home in Australia and the United States.
To start things off what are the general rules for buying property?
Everything you need to know about buying a home in the US
- Can Australian Expats Buy Property in the USA?
- What Options are there to Help Veterans and Active Service Members Purchase a Home in the USA?
- How is Buying Property in the US Different from Australia?
- What Do Australian Expats Need to Do After Buying a Property in the US?
- Congratulations, you're a US Homeowner!
Can Australian Expats Buy Property in the USA?
Yes. Generally, non-citizens can legally purchase property in the US. This includes Australian expats with green cards or visas.
US Home Buying Restrictions for Visa Holders
Only specific visa types qualify to get a mortgage as a non-resident visa holder. This includes E-3, H-1B, and L-1 visas. However, your lender may set additional requirements, such as proof of foreign income and assets. Plus, there may be limitations on the loan products offered to you. Under certain circumstances, some Australian banks offer overseas property mortgages.
Co-op Restrictions for Expats
You might also have difficulty buying through a housing cooperative, aka a co-op, where you own a share in the cooperative, not the property itself. The co-op board may deem you an unacceptable risk especially if you don't have substantial income and/or assets in the US.
What Do Australian Expats Need to Purchase a Home in the USA?
As a minimum, you need the following to finance and buy a US property:
Social Security Number
Here's how to apply for a social security number (SSN). If you're not eligible for a SSN, you can use an Individual Taxpayer Identification Number (ITIN).
US Bank Account
Australian expats can legally open a bank account in the US. Find out the best US bank accounts for foreigners.
Good Credit Score
Most lenders require a minimum credit score of 620 – 640 to qualify for a conventional loan. However, a credit score of around 720 – 760 and above will get you the best home loan terms and interest rates. Get started NOW if you need to build your credit score.
Lenders typically require a 20 % down payment for your mortgage to offer the best home loan terms and range of home loan products.
Some home lenders offer mortgage products requiring as little as 3 or 3.5 % down. However, you'll also pay private mortgage insurance (PMI), plus your interest rate and monthly payment will be higher. If the seller receives multiple offers, yours is more desirable and less risky if you've got a 20 % (or higher) down payment. So be prepared to forgo that avo on toast until you've saved up.
If Australian savings will go towards your down payment, use an international money transfer service to consolidate funds into your US bank account.
Your offer has a better chance of being accepted with a mortgage pre-approval because the seller has extra assurance you can finance the property. To get a pre-approved, lenders require as a minimum: US proof of income, US tax returns, W2 forms, statements of savings, investments, and other assets. If your lender deems these insufficient, they may also require Australian bank statements and tax returns. Or they may reduce your borrowing limit.
Get pre-approved for a mortgage and make sure your lender understands your visa because not all visa holders are eligible.Saskia Feain
To learn more about US mortgage products, mortgage rates, and how to get pre-approved, start with Realtor.com, an official site of the National Association of REALTORS.
Savings for Closing Costs
Don't forget to budget savings for closing costs, typically 2 – 7% of the property purchase price. Closing costs cover services and fees to complete the real estate transactions, including appraisal fees, title searches, insurance, legal fees, and filings. Some lenders allow you to roll closing costs into the mortgage.
What Options are there to Help Veterans and Active Service Members Purchase a Home in the USA?
Are you a veteran or an active member of the military? Firstly: thank you for your service and the sacrifices you and your family have made. You may be eligible for a VA loan backed by the Department of Veterans Affairs. A VA loan lets you buy a home in the US with no down payment, no mortgage insurance, lower interest rates, and more relaxed credit requirements.
How is Buying Property in the US Different from Australia?
The overall process of buying a home in the US is similar to buying a property in Australia. But it helps to swot up on US-specific real estate terms and be aware of some crucial differences:
US House Hunting is Refreshingly Transparent
If the Aussie house hunting process feels vague, you'll love the transparency in the US. Over disclosure is de rigueur, particularly in litigious states.
Instead of property listing with nebulous terms like “Address available upon request” or “For sale by negotiation,” you'll find helpful, practical data. US homebuyers can access free public data for the property, including listing price, address, price history, local taxes, and nearby school ratings. The best sites include Realtor, Zillow, and Trulia. Having said that, don't go it alone…
A Buyer's Agent is a Must
A buyer's agent is a licensed real estate professional who's legally bound to represent YOUR interests. They use their knowledge of the property market to help you find a home and negotiate your purchase. Their experience enables you to avoid common mistakes. It makes the home buying process as easy and stress-free as possible.
They have existing relationships with selling agents, who rely on the vast network of buyer's agents to get the word out about new and upcoming listings. They're eligible to access the Multiple Listing Service (MLS), so they know which properties are for sale as soon as they're listed. The MLS is a collection of hundreds of regional databases listing all US homes for sale, and it's accessible only by licensed agents and brokers.
Best of all, there's no cost to you. When you buy a property, the seller pays a commission to both the buyer's agent and the listing agent.
There are two types of agents in the US. The transactional agent keeps moving on to the next buyer or seller. If they don't buy or sell fast enough, they move fast. The relational agent creates a relationship and goes at your pace (be it fast or slow). They keep in touch and are always there for you in the future.Saskia Feain
Like any profession, not all buyer's agents are equal. Use your Aussie instincts and personal recommendations to find a buyer's agent with the right personality fit and professional chops to help you find your dream home. When you work with a buyer's agent, you'll sign a contract called an “exclusive buyer agency agreement.”
Private Showings Give You the Edge
If auction-stickybeaking was one of your weekend pastimes in Australia (mea culpa!), you'll be disappointed. In the US, private property showings are one of the primary marketing tools. If you're working with a buyer's agent, they'll show you the property (generally sans seller's agent).
Here in Silicon Valley, auctions are hardly ever, but in essence, when a listing agent sets an offer date you have a kind of paper auction, so you are trying to outbid or outsmart another buyer with your contingencies on paper.Saskia Feain
Open houses ARE held, but they're more about stoking the buzz once the home has been listed and encouraging ambivalent buyers to make an offer. And in a hot market, by the time the open house rolls around, it's common for the property to have already received multiple private showings (and an offer or two).
US Home Buying Might Seem Aggressive
Most realtors in the US work off commissions, whereas, in Australia, there's the safety net of a base salary (albeit minimal). As one US realtor told me, “If I don't sell, I don't eat.” If a buyer's agent is involved in the sale, commissions are split. So it's in everyone's best interest to be direct, efficient, and transparent in negotiating a win-win outcome for buyer and seller.
For a laid-back Aussie, it can all feel a bit in-your-face. It's not personal, and it's another excellent reason to enlist the help of a buyer's agent. They have the skills and the know-how to handle the stress and heavy lifting of the hustle.
Pay Attention to Property Taxes
As a US property owner, you're liable to pay state and city property taxes. These can vary from one county to the next. It's generally a case of getting services you pay for. For example, in New Jersey property taxes are higher than in New York City, but as one parent told me, “New Jersey public schools look like college campuses.” However, check the property taxes in the listing because they affect your ongoing homeowner expenses.
What Do Australian Expats Need to Do After Buying a Property in the US?
So, your offer has been accepted, and the wheels are in motion! Closing on a US home takes a minimum of 30 – 45 days (but typically 2 months or longer) from when you sign the contract. While you're waiting, get ready to do the following:
Speak to an Expat Tax Professional
Tax for Australian expats in the US is already complicated because you have tax obligations in the US and Australia. When you buy US property as an expat, as a minimum, there are disclosures you must provide to the Australian Tax Office (ATO) and Internal Revenue Service (IRS). A US-Australia tax specialist can expertly guide you.
Claim Deductions on Your US Tax Return
If the home is your primary residence, you can claim tax deductions when you file your US tax return.
It's the opposite in Australia, where you can only claim tax deductions for investment properties.
Think About Selling Your US Home
What? You haven't even moved in yet. But chances are, someday, you WILL sell your US home and/or return to Australia. The US and Australian tax rules for expats who sell a US home are complicated.
“Make a plan for an eventual sale of your home. If you move back to Australia, you'll have the most tax-effective plan in place as there can be complexity.”Jason Stoch
For example, in Australia, you don't pay capital gains tax (CGT) on the sale of your primary residence. But in the US, capital gains exemptions for the sale of your home are capped at $250K for single filing or $500K for joint filing. Also, if you move back to Oz, the timing of selling your US home can affect your tax obligations in Australia. So it's best to consult a tax professional specializing in US tax matters for Aussie expats.
Update Your Will
Not a fun task but an important one after you purchase property in the US. Here are the basics to update your will as an Aussie expat.
Notify all the relevant authorities that you've moved
When it comes time to actually relocate, if you're an expat on a visa or a green card there are a number of departments you need to notify, let alone all the organizations from insurance to mail. Here's a comprehensive list of who to notify and when!
Congratulations, you're a US Homeowner!
All your research has paid off. Now that you've purchased your US property, all that's left is to furnish your home and send out invites for your housewarming party.
Australian Home Buying Professionals in the USA
Thank you to the following Australian professionals in the US for their contributions to this article:
Saskia Feain (#01735617 DRE), Licensed Realtor, Intero Real Estate
Saskia is a Realtor and a member of the National Association of Realtors (NAR) and California Association of Realtors (CAR). She lives in the Heart of Silicon Valley, and her vast experience in the property market centers around Santa Clara County. Saskia has helped a range of clients, including engineers, teachers, nurses, builders, and even lenders, buy and sell their homes.
Get in touch with Saskia here.
Jason Stoch, Managing Director, Uptrend Advisory
Uptrend Advisory helps Aussies with tax advice and understanding of the implications of purchasing/selling homes (primary residences and investment properties) in the US/Australia. It's a remote-based firm in San Diego, California, servicing clients across the US and Australia.
Get in touch with Jason here.