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How to Purchase a Home In Arizona If You Are Not A U.S. Citizen
Arizona is a major hotbed for what’s called “foreign nationals” — persons from another country residing in the United States. Most foreign nationals who come to Arizona to invest or purchase second homes are from either Canada or Mexico. However, I have also seen buyers from the United Kingdom, Europe, Latin America, and South America. Many foreign nationals would like to purchase property in the United States but find the process confusing. It does not have to be complex. In fact, it is simple, and I will walk you through it.
First, a foreign national will need a 30% down payment for a second home. For investment properties, they may need more than 30% down, depending upon their credentials. In addition, the buyer will be required to show liquid reserves equal to 3 to 6 months worth of mortgage payments. To calculate this amount, multiply your potential mortgage payments by 3 to 6, depending upon the terms the lender is requiring. Interest rates are typically 1%-2% higher than a “prime borrower” can obtain as a citizen of the U.S. Currently the prime rate for a mortgage runs around 5.75%, so if you are a citizen of another country looking to purchase in Arizona, you can expect an interest rate of 6.75%-7.75%. This is actually very reasonable, all things considered. Also, note that some mortgage lenders will require a foreign national to have a United States bank account. Acquiring one is relatively simple, but it depends on the nation you are coming from. In addition, the following items may also be needed depending upon the country and the borrower’s situation:
- As a potential buyer, you will need a passport and a visa that allows you to be in the United States at varying times. If a visa is not required for your home country, then you will need to present a “cedula de identidad” or other government issued ID. If a visa is required to come into the U.S. but you do not have one, then you can still acquire property in the U.S., but only as an investor. Expect higher down payments and interest rates, but the other requirements are similar.
- Lenders may call for one or two letters of reference from your bank (with English translation), proving at least a two-year association. The lender may only require one letter if your bank is an international bank or has a location in the United States.
- Lenders will require a U.S. credit report and/or an international credit report from your country of origin. If no credit report is available from country, that is OK, but you will need a credit letter from someone you have had credit with for at least two years. This is to establish some sort of credit worthiness for the buyer.
- Lenders will also want to see verification of sufficient funds to complete the transaction plus three to six months of mortgage payments in a bank in the United States or in the country of origin (as already described above).
- You will also need to produce a letter from your accountant, on the accountant’s letterhead, indicating your income for the previous 2 years and the details regarding ownership of any business. If you are not self-employed, you may submit a letter from your employer. All reported income must be stated in terms of U.S. dollars.
In the past year, Arizona has seen a significant demand from Canadians who want to purchase second homes for the winter or investment homes. Canadians are capitalizing on the current strength of their currency vs. the relative weakness of the American greenback. In addition, homes in most of Canada are much more expensive than in Arizona, especially Tucson. Average prices in most Canadian cities run roughly 400k-500k (or more)! Couple that with the currency power, and Canadians can purchase homes in Tucson or Phoenix very cheaply. Many just take a second loan on their home in Canada and pay cash for their Arizona home. (I recommend this strategy if the buyer can afford to do so.) If you would like additional information about purchasing an investment property or home in Arizona and are currently living in another country, please contact us so that we can help you understand what items will be needed to allow a purchase.