Mortgages In The USA

Here you will find information to help you make a decision when considering how to finance your USA property purchase.

The USA mortgage situation in 2008

It cannot be overlooked that the USA, along with the rest of the world, is undergoing a major credit crisis, causing much uncertainty in many markets, including real estate. With property prices having shrunk by an average 25% in the USA, sadly by the end of 2008, many millions of Americans will have mortgages worth much more than the value of their homes.

At the root of the problem lies the subprime mortgage crisis which began in summer 2007 and has had knock-on effects on the entire economy: during this time banks had lent overzealously to homebuyers who could ill-afford repayments and soon found they could not pay back their loans. Wall Street took on the risky debt in the form of mortgage-backed securities, which collapsed, having been sold around the world as a safe investment.

For years mortgages in the USA have been widely available to foreign buyers as well as citizens, with easy initial terms. This, accompanied by rising house prices in recent years, has encouraged borrowers to take on high, easily available mortgages, safe in the belief that they could re-finance if necessary. The subsequent drastic fall in house prices during 2006 and 2007 has made such refinancing nigh on impossible and foreclosures have become commonplace, in turn triggering the global financial crisis we are experiencing today.

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With a surplus inventory of homes available for sale, many cash buyers with a clear vision for long term growth for the future are wasting no time in taking advantage of greatly reduced prices, while enjoying strong buying power in relation to the dollar.

Procedure for getting a mortgage

Requirements vary from state to state and therefore the information we supply must be considered solely as a guideline in principle to mortgage applications in the USA. Terms such as ‘points’ need to be understood, as well as the implications of repayment and application costs.

Most agents and brokers agree that it is advantageous to consult a mortgage broker and pre-qualify before looking for your property. Pre-qualification will enhance your credibility in the eyes of agents and sellers as well as assisting in speeding up the purchase process.

Down Payments

The majority of USA mortgage companies require a down payment of 20% for non-USA residents with proof of employment or documentation to confirm proof of income for the self-employed. In general the higher the deposit, the easier the process and the fewer proof of income documents are needed. Proof of the source of income has become an additional requirement since September 11th.

Choosing a Mortgage

The right type of mortgage for you depends on various aspects:

  • Your existing financial circumstances
  • Whether you expect any future changes in your finances
  • The length of time you intend to keep the property
  • How you feel about fluctuations in the mortgage repayments

A fixed rate mortgage over a period of say 15 to 20 years could save many thousands of dollars over the period of the loan, but repayments are higher. On the other hand an adjustable rate mortgage may start with lower monthly payments, but these will obviously change if interest rates go up.

Documentation Required

  • The final purchase contract for the property (if applicable)
  • Proof of income pay slips for the last year. These should be computer generated or originals to that identify the employer and employees name.
  • If you are self-employed personal and business tax returns for the last two years.
  • Account numbers for al bank accounts
  • Information about all debts including credit card account numbers

Escrow Account

Mortgage lenders often set up escrow accounts to cover payments of costs such as property taxes, local taxes and property insurance premiums. They ensure these bills are paid in a timely fashion and help the homeowner to avoid the pitfalls of unpaid bills.

Clich here to get a quote on a mortgage in the USA

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When considering a buying property in United States, you are well advised to get expert mortgage advice from a mortgage broker.

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