How is property bought without a U.S. credit history?
What property finance options are available to foreign nationals?
What steps are required to transfer money from a foreign country?
For the past 12 months foreign buyers have invested almost $83 billion in U.S. homes, and this doesn’t even reflect their commercial and agriculture property purchases. This is a 24% increase over the previous 12 months. And, home buyers from China, Hong Kong and Taiwan represented the lion’s share of this group in the Bay Area. The U.S. housing market is “On Sale” for the world compared to any other country. The falling housing prices the past five years and the world’s currency exchanges is what is causing the boom in foreign nationals’ U.S. home purchases. Foreign nationals in the San Francisco Bay (YouTube) area purchased almost 10% of all homes in the past twelve months.
The chief economist for Trulia.com, Jeb Kolko, said it best, “Housing is much more affordable in the U.S. than it has been, both for Americans and foreigners. In markets where prices fell dramatically during the housing bust, foreigners have been searching for and buying bargains.” In the San Francisco Bay Area there are over 100 million page views per month, just on the Trulia.com site alone. And, 6% of these monthly views are coming from foreign buyers looking to move to the Bay Area.
Hurdle #1: No U.S. credit history:
This is probably the number one issue for Chinese and foreign buyers of homes in the Bay Area. If they are not making an all cash purchase for a home, they need to get some type of mortgage financing. And, since they are a foreign national they have never created any credit in the U.S. so they have no FICO score. This means the banks have no way of determining their credit worthiness for a home mortgage.
Hurdle # 2: Finding a lender who will loan a home mortgage:
Since the vast majority of Chinese home buyers have no FICO score, they either pay cash or have to find a lender who will provide them a mortgage. Often times the only lender available are banks who they have accounts with in Hong Kong or mainland China who have corresponding offices in the Bay Area. For example, the Bank of China has correspondent offices in the U.S. (Other lender options are British banks who have offices in Hong Kong – Barclays, HSBC and Standard Charter for example.) And, the estimated yuan required to purchase a $1.425 million home in the Bay Area is ¥8,888,888.
Hurdle #3: Transferring funds Into the U.S.:
And, finally, the bigger challenge is how to have the Chinese home buyers get their money into the U.S. This is not just a challenge for Chinese home buyers in the Bay Area, it is also a challenge for any foreign national. There are U.S. restrictions as to how much money can be brought from a foreign country. And, the home country also has restrictions. For the Chinese home buyer it is often best to have their money in a Hong Kong bank in order to more easily get the funds into the U.S. The currency exchange company we use exclusively is Realty FX. They are the most efficient and cost effective currency exchange company we have found. If the funds are not in the U.S. it is rare that a purchase offer can be written because of the need to verify the buyer has ‘good funds’ to complete the purchase of the home.
Where Bay Area foreign home buyers come from:
Canada and the United Kingdom were the most common countries of origin for foreign people searching for Bay Area real estate during the past 12 months. Here is the list in order of the top countries with people searching for Bay Area properties; Canada; Untied Kingdom; China/Hong Kong; France; Germany; India; Taiwan; and, Japan. We are standing ready to be of service to any of your real estate needs. Contact us today! Until next time…Jim Walberg.