The USDA loan provides 100% funding for the purchase of a rural home. It’s a great program for those that don’t need to live in the city limits. The USDA is rather lenient with its guidelines. But, there is one they don’t waiver on – residency.
The USDA loan is only available to those who are US citizens or permanent residents. Those with an H-1B Visa or any other type of work visa do not qualify for USDA funding. But, there is good news. There are other loans you may qualify to receive as a non-permanent resident.
Government Sponsored Options
Although you can’t secure USDA funding as a non-permanent resident, there are other government options. The FHA loan offers options for those with a work visa. This is a popular choice for immigrants living within the US temporarily. The program only requires 3.5% down and has liberal underwriting guidelines.
- Work Visa Requirements – Before you apply for an FHA loan, you should know the work visa requirements. It isn’t enough to have a work visa. It must be good for at least one year after the closing date. If it expires before that time, you must secure proof that it will be renewed.
- Work Documents – It isn’t enough to provide your work visa. You must also provide proof of your employment. This means providing valid paystubs and/or W-2s showing your income and employment.
- Social Security Number – Your lender also needs proof of your social security number. The easiest way to provide this is with a social security card. If you don’t have one accessible, your paystub or W-2 showing the number may suffice.
- Proof of Owner Occupancy – FHA loans are only for owner occupancy. This means they don’t provide financing for second homes or investment homes. You must prove you will live in the home for a majority of the year. This is even more important for non-resident aliens. There is a large risk that you will go back to your home country for an extended period.
In general, FHA loans have lenient guidelines. You only need a credit score higher than 580. Some lenders may require a higher score for those with an H-1B Visa, though. If you don’t have established credit in the United States, you may be able to use alternative credit. This means things like:
- Phone bills
- Insurance payments
- Rent payments
Any payment you can prove over a period of 12 months with canceled checks. Of course, you must have timely payments.
Conventional Loan Options
Fannie Mae and Freddie Mac also offer loans for non-permanent aliens. These are the two largest mortgage giants. They have many of the same guidelines as the FHA, with the exception of the down payment and credit scores.
Just like with FHA loans, Fannie Mae and Freddie Mac want to know you are going to have income for at least the next 3 years. This is proven with your work visa. If it is due to expire, a lender may not approve your application. They need proof of consistency for at least the next 3 years. The best way to prove this is with renewed residency. This reduces the risk of default. You must also possess proof of a social security number.
The conventional loan requirements mimic those for United States citizens:
- Credit score over 680 (some lenders may use alternative credit)
- 5% down payment
- 28/36 debt ratio
- Proof of reserves (money to cover the mortgage if your income stops)
If you need more than the standard conforming amount of $424,100, you may need additional documentation. First, you need a stronger history:
- You must prove you worked in the United States for at least 3 years
- You must also prove residency here for at least 5 years
To get approval for a jumbo loan, you also must prove a high likelihood of continued employment. This is to cover the bank on a much riskier loan. Defaulting on a $100,000 versus a $600,000 loan makes a big difference to lenders.
In addition, jumbo loan applicants can only purchase a single-family home or condo. It must also be an owner occupied property. Last, you need at least a 30% down payment rather than just the 5% needed for a conforming loan amount.
A majority of non-permanent residents buy homes in the United States with cash. But, many don’t realize the options they have available to them. Mortgage lenders don’t deny applicants based on their country of origin. As long as you have proof of continued employment in the United States, you may have a good chance at approval for a non-resident loan.
The only downside of non-permanent residency is the lack of eligibility for the USDA loan. This loan program is for borrowers with low to moderate income and permanent United States citizenship. The USDA guarantees the 100% LTV loan, which makes it risky for the USDA and lenders.
The fact that it is not available to those with an H-1B Visa is not a barrier to home ownership, though. There are many other ways to secure a mortgage. The easiest way is to establish credit and a credit employment history. Even without perfect credit you can secure a loan. Having compensating factors will help your situation, though.
Compensating factors are things like a low debt ratio, extended and stable employment, and many months of reserves on hand. This helps decrease the riskiness of your loan for a lender. FHA loans may offer more eligibility because of the guarantee the FHA provides a lender. This makes lenders better able to handle risky loans. Conventional loans are also a possibility as long as you have the credit and other qualifying factors.
Even though you can’t use the USDA loan with an H-1B Visa, you have options. You may even be able to use these loans to purchase a rural property if that’s what you prefer. Talk to several lenders to see what options you have. Not every lender will offer loans to non-permanent residents, but don’t give up. There are lenders out there.