To borrow money for your home purchase, you may apply to a bank or another lending institution for a loan. You will need to provide the lender with proof of employment and monetary figures reflecting your salary, assets and obligations (such as outstanding loans and debts). In addition, the lender will appraise the home to ensure its value exceeds the amount of the loan. Typically, banks will lend up to 80 percent (or perhaps more) of the home’s purchase price.
In exchange for the house loan, the lender takes a security interest called a mortgage. A mortgage allows the lender to sell your home to recover its expenditure if you fail to make mortgage payments.
In deciding whether to issue a mortgage, a lender will verify that you will make your loan payments. If you are from outside the United States, the lender may ask about your visa status and how long you are authorized to remain in the United States. Lenders may request a letter from your immigration attorney that explains your situation.
Lenders do not loan money to an applicant who is considered to be a bad credit risk. Your credit risk is determined by looking at your history of repaying loans and credit card bills on time. Lenders will look at your monthly gross income and other sources of income along with your minimum monthly payments – such as credit cards bills, student loans, car loans etc. – to determine whether you have enough funds to meet a mortgage payment. Typically this information is tracked through your Social Security Number (SSN). Many foreigners do not have an SSN, or, if they do have a SSN, they have had it for such a short time that no meaningful credit history is available. In such cases, the loan applicant may need to work with his or her bank overseas to provide other evidence of creditworthiness and past payment history.
The lender may require a larger down payment on the loan beyond the standard 10–20% or it may assess a higher interest rate to compensate for what it perceives as an unknown credit risk.
When a lender approves a home loan, it issues a commitment letter stating the terms of the loan and the date by which the closing must occur.
There are state and federal programs that often times offer mortgages to qualified buyers at low rates or require a smaller down payment. New York state also has a
closing cost assistance loan.