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FHA Loans for Non-Permanent Resident Aliens
The U.S. is known to attract a huge number of immigrants each year. In fact, only in 2017, there were 44.4 million immigrants residing in the States, which made up 13.6% of the population of the nation. That being said, many immigrants will want to have access to certain benefits, such as FHA loans. Is an FHA loan non-permanent resident alien possible, though? Let’s find out.
Can Non-Permanent Resident Aliens Get FHA Loans?
You may think that being a non-permanent resident alien automatically doesn’t allow you to get an FHA loan, but is that so?
FHA loans are accessible to all lawful resident aliens as long as they meet the requirements. Whether you’re a permanent or a non-permanent resident alien, it doesn’t matter. As a non-permanent one, you still have the right to an FHA loan.
The only difference is that there are some special requirements for non-permanent ones, compared to permanent residents. For instance, as a non-permanent resident alien, you will only be able to obtain a loan if the property you use the loan for will be your main residence. You need to also have a BCIS Employment Authorization Document, and you must be eligible for U.S.A. work and have a valid social security number.
According to the FHA rules, “If the authorization for temporary residency status will expire within one year and a prior history of residency status renewals exist, the lender may assume continuation will be granted. If there are no prior renewals, the lender must determine the likelihood of renewal, based on information from the BCIS.”
Two Types of U.S. Residency
When it comes to U.S. residency for foreign-born people, there are two types to keep in mind:
Permanent Resident Alien Green Card Mortgage
A permanent resident alien is someone who has a social security number and a green card. If a permanent resident alien will want to get a mortgage by applying for an FHA loan, they will have to provide the lender with a Social Security card, and a valid green card, respectively Form I-551. The process is pretty much similar to that of a citizen, apart from providing the resident alien documents.
An estimated number of 13.2 million people are said to have Green Cards in the U.S.
Non-Permanent Resident Alien Work Visa Mortgage
Non-permanent resident aliens are immigrants who live in the U.S., yet they don’t possess a green card. Instead, they have a Social Security Number. Usually, these people stay in the United States to work, but they don’t want to be involved with the project or position permanently. Even though they won’t have permanent employment, they still want to live somewhere in the meantime, which is possible by purchasing a home.
This is possible through mortgages. For a non-permanent resident alien to obtain a mortgage, though, he/she must comply with the rules.
FHA Loan Special Requirements
As a non-permanent resident alien, you need to know that there are some specific requirements to keep in mind if you want to obtain an FHA loan.
First of all, one of the rules states that “FHA insures mortgages made to non-permanent resident aliens provided that the property will be the borrower’s principal residence, borrower has a valid Social Security Number (SSN), and borrower is eligible to work in the United States, as evidenced by an Employment Authorization Document (EAD) issued by the USCIS.”
So, if you want a mortgage, you should make sure that the house will be your main property, or else you may not qualify for the loan.
Some of the FHA loan requirements are:
- Non-required citizenship
- $679,650 loan limits
- Debt to income ratios of 31% housing and 43% total maximum
- 10% down payment with 500 FICO score
- 3.5% down payment with 580 FICO score
With that being said, it’s important to know that there are also requirements when it comes to your credit score. As you can see, the FHA program doesn’t mind you having lower scores, as it allows 580 and 500 scores too.
However, just because lower credit scores are listed as eligible for obtaining FHA loans as a non-permanent resident, it doesn’t mean all lenders will lend you cash. Some lenders add overlays to the low scores, so you may not be able to obtain an FHA-insured loan if your score isn’t FICO 600 or FICO 620.
This happens due to lenders being afraid of penalization by FHA. In case too many loans of low-quality fail, then they will have to deal with penalization by FHA, which will often consist of being revoked their FHA mortgagee status or being fined.
There are other requirements to keep in mind. As the FHA regulations mention, “U.S. citizenship is not required for mortgage eligibility”, yet there are still other requirements that you should meet in order to determine your residency status. In order to get an FHA loan from a lender, you must make sure that:
- You meet the same requirements, terms, and conditions as the ones met by U.S. citizens.
- You are eligible to work in the United States, which is proven with an Employment Authorization Document issued by the United States Citizenship and Immigration Service (USCIS)
- You have a valid Social Security number (SSN) unless you work at a foreign embassy, the World Bank, or you’re an equivalent employer identified by HUD
On the other hand, if you want an FHA loan for manufactured housing, you will be eligible if your housing:
- Has a minimum floor area of 400 square feet
- Is built and remains on a permanent chassis
- Is made as a one-family dwelling
- Has been transported to the site from the dealership/manufacturer
- Has HUD certification label affixed or has at least gotten a letter of label verification on HUD’s behalf.
- Has gotten a real estate classification (but doesn’t have to be treated the same way as a real estate due to taxation)
- Was built in accordance with the Permanent Foundations Guide for Manufactured Housing and made in such a way to be used as a dwelling with a permanent foundation
Conventional Loan Special Requirements
If you want to seek a conventional loan instead, then there are some things to take into account. Just like any type of loan, they have their own requirements too.
For instance, you need to have evidence of continued residency and income. Simply put, you must bring proof of your residency status and intend to stay in the U.S. for longer, and you need to have a stable income too, to make sure you are able to repay the loan. The minimum amount of time for which lenders want to see a continuation of income and residency is 3 years.
In addition, you need to have a valid Social Security Number.
Obstacles for Non-Permanent Resident Aliens
You should expect to come across some obstacles. It’s not that easy for non-permanent resident aliens to get an FHA loan, so you need to be aware of the potential obstacles before you try to apply. You will find them below.
U.S. Credit Score
If you don’t have a year in the U.S. just yet, that may be a problem. Basically, as a borrower, you need 12 months of history in two or three accounts in order to create a credit score in the U.S. This is why many people choose to wait before applying for a mortgage.
Not having enough credit history is an issue for many non-permanent resident aliens who want to apply for a home loan. You need to use your credit for a while and have a valid SSN in order to create your own credit score.
You should bear in mind that some lenders will require some trade lines like an auto loan or credit card to see if you qualify. Others will also allow you to qualify with a non-traditional credit report, which consists of other accounts like cell phone, electric or water.
Proving Foreign Income and Assets
It’s not rocket science – lenders need to make sure you will be able to repay the loan after borrowing it, and what better way to prove that than through income evidence? You need to provide documentation of your income over the last two years. Qualification is possible even if you have a foreign income.
At the same time, you will need to bring evidence of your liquid assets, to make sure you have enough to pay the closing costs and down payment. Just like with the income, you can have foreign assets and qualify as well. The lender will usually choose a third party to translate all foreign documents into English.
Foreign Nationals without Long-Term Residency
There may be limits to who can get a loan, depending on whether they have a long-term residency or a short-term one. If you’re in the latter category, then you may still be able to obtain a loan, except that it will be offered by individual lenders and banks. They are able to offer loans that were created especially for foreign visitors who need a home for the time being. The loans are known as foreign national mortgages.
Qualifying as a Permanent or Non-Permanent Resident Alien
As an immigrant to the U.S., you have access to mortgage credit the same way as the citizens. So, you will be able to live in your own house in the U.S., just like your acquaintances who are natural-born U.S. citizens.
How to Apply for an FHA Loan as a Non-Permanent Resident Alien
Applying for an FHA loan is not that difficult. You just need to follow the steps listed below.
Get the Necessary Documentation – First things first, you must have the proper documentation if you want to qualify for the FHA loan as a non-permanent resident alien. This means that you will need your Social Security Number, proof of your work eligibility, as well as copies of your current tax returns, and two months of bank statements, pay stubs and W2’s.
Shop Around for Lenders – Once you have everything that’s needed, you should submit your application. It can be done online very quickly, as many sites have the option to fill out a form. Most banks and other mortgage lenders offer FHA loans, so you won’t have a hard time finding them. However, not all lenders offer the same benefits – that’s why you need to shop around for a bit. Look for lenders, compare the ones that you find and choose the most convenient one.
Submit the Application – As mentioned, you can easily submit the application online through an online form. You will provide personal information and documentation, and the lender will review it and decide if you’re worthy of receiving a loan. Some information will also be obtained from the credit reporting agencies by the lender.
Coming Up with the Down Payment
Buying a home is not cheap – so, you need to make sure that you also reduce your mortgage costs. This can be done as long as you bring a big down payment to make sure this happens. You can pay in cash, as it’s the best method, but it may be hard to do this unless you saved thousands of dollars.
As such, you can try getting down payment cash from private loans or credit unions. They have different borrowing criteria, and each lender is unique. But there are high chances of being eligible for a personal loan if you’re also prepared to get a mortgage. To determine your eligibility, lenders will take a look at your credit history and score, job history, employment status, and monthly income.
How to Get a Personal Loan for an FHA Mortgage Down Payment
Non-permanent resident aliens in the United States often face unique hurdles on the road to homeownership. One potential pathway is utilizing a personal loan as a down payment for an FHA loan — a strategy that requires careful planning and an understanding of both the FHA guidelines and personal loan implications.
Step 1: Understanding FHA Loan Eligibility
First, determine if you are eligible for an FHA loan. The FHA allows non-permanent resident aliens to apply for loans as long as they meet certain requirements. You’ll need a valid Social Security number, proof of lawful residency, and evidence of steady employment and income. Lenders will scrutinize your work history and income stability, which must be verified through documentation such as tax returns and pay stubs.
Step 2: Examining Personal Loan Feasibility
While FHA loans require a lower down payment than many other types of mortgages, coming up with the funds can still be a challenge. Here’s where a personal loan may come into play. Before pursuing this option, evaluate whether a lender will approve a personal loan for this purpose. They will consider factors such as your credit score, debt-to-income ratio, and the stability of your residency status.
Step 3: Assessing Financial Implications
Taking out a personal loan increases your monthly financial obligations. As a non-permanent resident alien, lenders may see you as a higher risk, which could lead to higher interest rates on both your personal loan and FHA loan. Calculate the combined monthly payments of your prospective personal loan and FHA loan to ensure they are manageable within your budget.
Step 4: Preparing for the Personal Loan Application
When you decide to apply for a personal loan, you’ll need to gather documentation similar to what is required for the FHA loan application. This includes identification documents, proof of legal residence, income verification, and possibly proof of address in the United States. As a non-permanent resident, be prepared for additional scrutiny and questions from lenders.
Step 5: Communicating with Mortgage Lenders
Before taking out a personal loan, have a candid conversation with your FHA loan officer. Some lenders may have policies against using unsecured loan funds as a down payment because it could affect your debt-to-income ratio, a critical factor in the mortgage approval process. Ensure your lender is on board with your strategy to avoid any surprises during the mortgage underwriting process.
Step 6: Strategizing Loan Timing
The timing of your personal loan is crucial. If taken out too close to the FHA loan application, it can negatively impact your credit score. Ideally, you want to secure a personal loan well in advance of your mortgage application to allow your credit score to recover and to establish a track record of on-time repayments.
Step 7: Closing on Your Home
If your strategy is successful and both loans are approved, you will proceed to the home buying process. This includes the home inspection, appraisal, and the final walkthrough. Once everything is in order, you’ll attend the closing meeting to sign the mortgage and loan documents, and finally, receive the keys to your new home.
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- How to Take a Personal Loan to Rent an Apartment in the U.S.
- US Mortgages for Nonresidents and Resident Aliens
- How to Finance an Addition on Your Home
The FHA regulations mention that “FHA Loan applicants must have a minimum FICO score of 580 to qualify for the low down payment advantage which is currently at 3.5%.” So, if you have a good score, you will qualify and have more advantages too. Of course, there are other requirements coming into play – thus, overall, an FHA loan non-permanent resident alien is possible if you comply with the rules. Check out Stilt if you need more information on mortgages for immigrants.