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To buy or not to buy-Credit history-Mortgage...

To buy or not to buy-Credit history-Mortgage...

Old Jun 7th 2017, 12:07 am
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Default To buy or not to buy-Credit history-Mortgage...

Hi All,
Moved to US 3 months ago and struggled to get a car without good credit history.
I'm looking to buy a house here and have a few questions.
1) Since we don't have good credit history here are there any lenders providing mortgage but not charge an arm and a leg?
2) I can barely afford 5% deposit. Unless I sell my UK home which i wan't to retain.
3) Given i'm on L1 visa should I buy or not? (Have got picked in the H1 lottery but not changing status anytime soon due to spouse working issues).
Spouse is not working yet, but looking out for a job (on EAD).
4) I have 75% equity in my UK home and excellent credit history back home in UK. Will this be considered here?
5) Should you buy a new home or go for old homes?(how old/new should they be as I heard the houses here not brick built like in UK)?

We are liking it here so may not go back unless our visa runs out or out of job.

If possible want to get onto property ladder here as soon possible instead of paying rent. So weighing if it's a sensible option or will it be a costly affair.
Any and all advice is appreciated.
Thanks.
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Old Jun 7th 2017, 1:16 am
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Default Re: To buy or not to buy-Credit history-Mortgage...

Having gone through this as recently as last week these are my opinions.

Originally Posted by bobsmyuncle View Post
1) Since we don't have good credit history here are there any lenders providing mortgage but not charge an arm and a leg?
Credit unions may cut you more slack than a bank if you can build a personal relationship. Banks refused to give me a mortgage due to not having 6 months credit history and would only lend to my wife. Our credit union was more than happy to lend to me (and my wife).

Originally Posted by bobsmyuncle View Post
2) I can barely afford 5% deposit. Unless I sell my UK home which i wan't to retain.
Ok, then forget it all. If you can barely afford a required % (which I've found is usually 10%!) then you're wasting your/others time. You need to factor in much more costs than the initial payment - such as inspection fees and attorney fees. We're talking thousands!

Then how are you going to build up a reserve to keep your house ticking? Like a new roof, AC, landscaping? All these would likely be managed in rented accommodation.

Originally Posted by bobsmyuncle View Post
3) Given i'm on L1 visa should I buy or not? (Have got picked in the H1 lottery but not changing status anytime soon due to spouse working issues).
Spouse is not working yet, but looking out for a job (on EAD).
I would not advise getting a mortgage when your status in the country is uncertain. I.e. you're not a permanent resident.


Originally Posted by bobsmyuncle View Post
4) I have 75% equity in my UK home and excellent credit history back home in UK. Will this be considered here?
Not at all.


Originally Posted by bobsmyuncle View Post
5) Should you buy a new home or go for old homes?(how old/new should they be as I heard the houses here not brick built like in UK)?
Don't buy.
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Old Jun 7th 2017, 2:35 am
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by tom169 View Post
Having gone through this as recently as last week these are my opinions.
Sorry if slightly off topic. We (that's a royal 'we', as you'll see) complete tomorrow , however we couldn't get a joint mortgage in this neck of the woods. Lenders wanted me to have been resident in the country for a minimum of two years, admittedly we have a fairly small deposit which limited options. I have been in continuous employment for over a year, whilst it's not a six figure salary it's a sight better than if I'd ended up working for Walmart. I am just wondering how easy you guys found it to extricate monies from the lenders?

Doh, I've just reread your post and seen the 6 months credit history bit.
Agree with the deposit information, I think ours worked out at about 8% and we stumped up all costs...

Hope OP has better luck than I did.

Last edited by zzrmark; Jun 7th 2017 at 2:39 am.
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Old Jun 7th 2017, 3:20 am
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by zzrmark View Post
Sorry if slightly off topic. We (that's a royal 'we', as you'll see) complete tomorrow , however we couldn't get a joint mortgage in this neck of the woods. Lenders wanted me to have been resident in the country for a minimum of two years, admittedly we have a fairly small deposit which limited options. I have been in continuous employment for over a year, whilst it's not a six figure salary it's a sight better than if I'd ended up working for Walmart. I am just wondering how easy you guys found it to extricate monies from the lenders?

Doh, I've just reread your post and seen the 6 months credit history bit.
Agree with the deposit information, I think ours worked out at about 8% and we stumped up all costs...

Hope OP has better luck than I did.
As I don't yet have a green card (adjustment pending) the credit union wanted a signed letter stating I plan to be in the US for the length of the loan.

The credit union didn't really seem to care about credit score. They even ran my credit and told me I didn't have any score.

I work in the same field as my job was in the UK and as I weren't unemployed all that long (waiting for EAD) my employment could be deemed continuous. As such I had years of earnings to take into account (to demonstrate ability to pay).

Between the wife and I we borrowed about 30% of what the lending criteria could have given us.

Ended up putting 10% down and then stumping up closing costs in the region of $4.5k.

Good luck with your closing!
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Old Jun 7th 2017, 10:20 am
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Default Re: To buy or not to buy-Credit history-Mortgage...

You may wish to check out this online calculator to help you look again at the financial aspects of your decision to rent or buy a property. It helps you assess your "break even" point, which would be different if you were in the UK as the processes are so different.
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Old Jun 7th 2017, 12:05 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by bobsmyuncle View Post
I'm looking to buy a house here...
I suggest you stop looking. You have a non-immigrant visa that can go belly up at any time - and you'd have to leave the US. If that happens, you'll be on the hook for the mortgage and no way to even live in the house.


We are liking it here so may not go back unless our visa runs out or out of job.
So, you already understand the tenuous nature of what you're proposing.


So weighing if it's a sensible option or will it be a costly affair.
These are not mutually exclusive options - so I'm not sure why you wrote "or". It will be both costly and nonsensical. I strongly suggest you don't buy a house until you have a green card.

Ian
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Old Jun 7th 2017, 12:54 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by bobsmyuncle View Post
.... 2) I can barely afford 5% deposit. Unless I sell my UK home which i wan't to retain. .....

We are liking it here so may not go back unless our visa runs out or out of job.

If possible want to get onto property ladder here as soon possible instead of paying rent. So weighing if it's a sensible option or will it be a costly affair.
Any and all advice is appreciated. .....
If you keep your home in the UK and stay long term in the US, becoming a permanent resident or US citizen, you are setting yourself up for a massive tax bill, potentially for tens of thousands of dollars! You basically have three years (36 months) after becoming liable for taxes in the US to sell your house with a good chance of avoiding most or all of the CGT liability. .... And don't think that it's only the gain on the value of your home you have to worry about, because there may be a gain on the payoff of the mortgage that dwarfs the taxable gain on the home.

If you become a US citizen you are stuck with this fact even if you return to the UK to live, as Boris Johnson discovered, and even some permanent residents (green card holders) can get into long term tax trouble even after leaving the US to live overseas.

Another more general point, the way houses are built in the US, buying a home is not a slam-dunk way to make money in the US like it usually is in the UK. Homeowners can face massive bills relatively frequently for a new roof or heating and AC system, and smaller repairs are a constant niggle, leading to expenses or a lot of time spent doing DIY tasks. I like doing DIY, but never imagined spending so much time doing repairs and maintenance. I used to joke that my house wasn't only my home, it was a hobby too, but after the first ten years the joke wore a little thin.

Last edited by Pulaski; Jun 7th 2017 at 12:57 pm.
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Old Jun 7th 2017, 7:53 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by Pulaski View Post
If you keep your home in the UK and stay long term in the US, becoming a permanent resident or US citizen, you are setting yourself up for a massive tax bill, potentially for tens of thousands of dollars! You basically have three years (36 months) after becoming liable for taxes in the US to sell your house with a good chance of avoiding most or all of the CGT liability. .... And don't think that it's only the gain on the value of your home you have to worry about, because there may be a gain on the payoff of the mortgage that dwarfs the taxable gain on the home.

If you become a US citizen you are stuck with this fact even if you return to the UK to live, as Boris Johnson discovered, and even some permanent residents (green card holders) can get into long term tax trouble even after leaving the US to live overseas.

Another more general point, the way houses are built in the US, buying a home is not a slam-dunk way to make money in the US like it usually is in the UK. Homeowners can face massive bills relatively frequently for a new roof or heating and AC system, and smaller repairs are a constant niggle, leading to expenses or a lot of time spent doing DIY tasks. I like doing DIY, but never imagined spending so much time doing repairs and maintenance. I used to joke that my house wasn't only my home, it was a hobby too, but after the first ten years the joke wore a little thin.
Thanks Pulaski. Assuming i go on to stay here for long and become a green card holder/citizen and then go back to UK to live there in the same house(but not sell it), do i still face tax trouble? Is there a provision to give that home away as gift to my kids if they want to go stay there in UK?

My thought process was to buy a new house(as they give 30 year warranty, and assuming credit union gives me a mortgage with about 7% deposit) and worst case if we need to head back home in an year(best case in 5 years) the house value would have appreciated and sell it , pay CGT and head back home. we would have saved on rent and enjoyed living in the home.
If it's financially viable then rent it out and leave. What say?
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Old Jun 7th 2017, 8:05 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by yellowroom View Post
You may wish to check out this online calculator to help you look again at the financial aspects of your decision to rent or buy a property. It helps you assess your "break even" point, which would be different if you were in the UK as the processes are so different.
Thank you, I shall try it.
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Old Jun 7th 2017, 8:07 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by ian-mstm View Post
I suggest you stop looking. You have a non-immigrant visa that can go belly up at any time - and you'd have to leave the US. If that happens, you'll be on the hook for the mortgage and no way to even live in the house.



So, you already understand the tenuous nature of what you're proposing.



These are not mutually exclusive options - so I'm not sure why you wrote "or". It will be both costly and nonsensical. I strongly suggest you don't buy a house until you have a green card.

Ian
Thanks for your frank suggestion. Want to crunch a few numbers and see what's the loss or will market appreciation makeup for any potential loss lets say if i sell after 2 years or so....a calculated risk.
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Old Jun 7th 2017, 10:13 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

You do realize that the realtors (estate agency) fees when you sell a property in the USA are far higher than when selling a property in the U.K.?

It's typically 6% (split between the vendor's agent and the buyer's agent; a buyer's agent is almost unheard of in the U.K. of course.....)

Personally I wouldn't contemplate buying a house without a green card....tbh we did 17 years ago but we are in an area where properties tend to sell very quickly. However we did have a shock when my husband's old boss (Managing Director and British) came to work in the NYC office on an L1-A visa yet was made redundant just six weeks later.
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Old Jun 7th 2017, 10:26 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by yellowroom View Post
You may wish to check out this online calculator to help you look again at the financial aspects of your decision to rent or buy a property. It helps you assess your "break even" point, which would be different if you were in the UK as the processes are so different.
This calculator gives some perspective: Breaks even at 2 year mark.
a) Monthly Rent = 1600
b) Home Price = 565000
c) Downpayment = 5% [28250]
d) Mortgage rate = 5%
e) Property tax = 1.25%
f) Annual home price change=9% (zillow and Trulia based)
g) Annual rent increase =3%
h) closing costs when buying=4%
i) closing costs when selling=6%
j)renovation costs=0.5%
k)maintenance costs=0.5%
l)homeowners insurance=0.5%
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Old Jun 7th 2017, 10:29 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by Englishmum View Post
You do realize that the realtors (estate agency) fees when you sell a property in the USA are far higher than when selling a property in the U.K.?

It's typically 6% (split between the vendor's agent and the buyer's agent; a buyer's agent is almost unheard of in the U.K. of course.....)

Personally I wouldn't contemplate buying a house without a green card....tbh we did 17 years ago but we are in an area where properties tend to sell very quickly. However we did have a shock when my husband's old boss (Managing Director and British) came to work in the NYC office on an L1-A visa yet was made redundant just six weeks later.
Yeah, that fear of being made redundant is always there. So asking all you noble souls before taking a decision. Thanks for all the advice.
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Old Jun 8th 2017, 2:13 am
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by bobsmyuncle View Post
This calculator gives some perspective: Breaks even at 2 year mark.
a) Monthly Rent = 1600
b) Home Price = 565000
c) Downpayment = 5% [28250]
d) Mortgage rate = 5%
e) Property tax = 1.25%
f) Annual home price change=9% (zillow and Trulia based)
g) Annual rent increase =3%
h) closing costs when buying=4%
i) closing costs when selling=6%
j)renovation costs=0.5%
k)maintenance costs=0.5%
l)homeowners insurance=0.5%
I think you're counting too much on price appreciation. Look what happened 10 to 5 years ago- prices halved in some places. How do you know we're not at a peak now? I wouldn't buy until at least your status becomes clear.
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Old Jun 8th 2017, 12:23 pm
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Default Re: To buy or not to buy-Credit history-Mortgage...

Originally Posted by Asg123 View Post
I think you're counting too much on price appreciation. Look what happened 10 to 5 years ago- prices halved in some places. How do you know we're not at a peak now? I wouldn't buy until at least your status becomes clear.
Agree.

If I did it correctly, lowering your 9% guess to 5% (which could still be considered optimistic) triples your break even time from 2 to 6 years.

And the property tax rate feels low. (But then I'm in a high-tax state
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