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Noncitizens can live the American dream, too

One of the coolest things about moving to the United States is that you don't have to be a citizen or even a permanent resident to borrow money to buy a home.

It isn't always easy for immigrants and long-term visitors to borrow money to buy houses. They have to develop a solid credit history, learn about taxes and insurance, buy within their means, and sometimes agree to less-than-ideal borrowing terms. Native-born home buyers encounter some of the same obstacles, but the problems sometimes are magnified for the foreign-born.

The hurdles are especially high for the hundreds of thousands of people who are in the United States on temporary work visas. The most common of these visas, the H-1B, lasts a maximum of six years for most holders.

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Buying on borrowed time
A typical H-1B visa holder is a college graduate with specialized job skills (such as computer programming) or is "a fashion model of distinguished merit and ability," according to the Immigration and Naturalization Service. There are similar temporary visas for movie stars, professional athletes and their entourages, nurses, and high achievers in the arts, sciences or business.

Although they may live in the United States for years, and come to this country with the intention of eventually gaining permanent residency, people holding these long-term, but temporary, work visas are classified as "non-immigrants." The INS can order them back to their countries of origin when the visas expire. That doesn't stop mortgage companies from lending money to them.

Rege Anu, a computer professional from India, came to the United States seven years ago. Anu first considered buying a house in Somerset, N.J., two years ago, while he was still here on an H-1B visa and officially classified a non-immigrant.

"I was very close to buying a home," he says. "I was pre-approved and ready to give an offer."

Anu's lender was more than willing to give him money, even though his visa would expire shortly and he could have been sent back to India if his application for permanent residency had been denied. Two things stopped Anu from buying the house: job insecurity and naiveté about rising home prices.

"Buying a house is a big commitment, and that's why I decided to stay until I got my green card," he says. Visitors on H-1B visas have to be sponsored by employers, and if they lose their jobs, they can be sent back home. Anu works for an Internet consulting firm, and he didn't feel entirely secure in his job two years ago when the dot-com bubble was in burst mode.

In November 2000 Anu got his green card denoting his status as a permanent resident. He is now an immigrant and no longer a "non-immigrant" on a temporary work visa. He is free to work wherever he wants, and no longer has to worry about being sent back to India in the event of a layoff.

Around the time Anu first considered buying a house in the spring of 2000, prices were skyrocketing. When he started looking, the house he wanted cost $140,000. A few months later, an identical home in the same development cost $160,000. "I waited for two years," he says. "I waited for prices to come down, and I finally decided they wouldn't fall further."

They sure didn't. In April he paid $223,000 on the same type of home in the same neighborhood he had looked at two years before.

Mortgage requirements
Anu got his loan from Arun Shah, a mortgage banker with The Provident Bank of Jersey City, N.J. Shah, who grew up in Bombay, specializes in mortgages for immigrants.

When Shah moved to the United States in 1985, it was tougher for long-term visitors and immigrants to borrow money. He remembers wanting to buy a car but having to establish a credit history first. So he got a personal loan from a bank, made a few payments on time, then qualified for a car lease. Later, he got a car loan. "Now they'll give automobile loans to anybody," he says.

He feels rather the same way about home loans. "The problem is now the industry has changed. They've started lending money on H-1 visas, or any other status," he says. In the old days lenders worried about uncertainty: "Suppose they just walk out when the U.S. government asks them to go away," Shah says. "The lender will lose money on that property. That was the biggest problem."

Now lenders don't seem so worried about borrowers being sent packing for their homelands by the INS, partly because many H-1B visa holders eventually gain permanent residency. Like Anu, they tend to buy homes only when they feel secure about their jobs and their residency status.

Shah says people who move to the United States sometimes have misconceptions. They believe that the entire monthly mortgage payment is deductible from federal income taxes (the interest and property taxes are deductible). And, like native-born first-time home buyers, they often underestimate the costs of taxes, insurance, utilities and maintenance, because many of those costs have been included in their rent.

"When you are looking at property, it should be in your budget," Shah says. "That is very important."

Malcolm Campbell agrees that the most important thing is to buy within one's means. Campbell, a native of Scotland who is here on a work visa and works as an assistant manager at a Washington Mutual branch in Roswell, Ga., says his advice to people here on work visas is to buy an affordable home and pump as much equity as possible into it in a short period.

Doing so makes it more affordable to refinance on better terms later, after the buyer has obtained permanent residency, Campbell says. He notes that most lenders push non-permanent residents into adjustable-rate mortgages.

Typically, he says, a new arrival to the country has to put at least 20 percent down and gets an adjustable-rate mortgage. Five-year and seven-year hybrid ARMs are popular, and foreign nationals often pay a higher interest rate than citizens with equivalent credit histories -- maybe an eighth-point or quarter-point higher or even more.

"The problem is obviously that person could skip town and leave the country, so it's kind of understandable why the banks would do that," he says.

Campbell himself bought his house with an ARM; he refinanced recently with his employer, using an ARM again. He and his wife, who is from Suriname, are both in the process of applying for green cards.

Credit history can be big help
He says the first thing a prospective homeowner should do after moving to the United States is to get a Social Security card. That's the key to establishing a credit history. It's crucial to obtain credit cards or auto loans and repay them on time.

"A lot come to America and don't understand the significance of paying bills on time," Campbell says.

A good credit record in one's country of origin doesn't count for much, he says. Lenders look at an applicant's U.S. credit history.

It's not enough to pay the rent and utility bills on time because landlords and utility companies typically don't report positive payment histories, only negative ones.

"Rent and utilities I look at as being a one-sided sword because it doesn't help you if you pay on time, but if you don't, it hurts you," Campbell says.

Lenders rarely ask foreigners how much time they have left on their visas, which mystifies Campbell.

"If someone has one year left on their visa, I think that person is a higher risk than someone who has five years of visa time left," he says. "I've never been asked how long I have left to physically stay in America. To be honest, I think that's a more risky loan than someone who has shady credit who's trying to improve it and pay bills on time and make things happen."

-- Posted: May 9, 2002
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