Usually, the down payment required for buying a home will be equivalent to 3% to 5% of the selling price. A larger down payment can also imply being eligible for a reduced rate on the mortgage (since less money is borrowed and as a consequence put "at risk"), and since a private mortgage insurance (or mortgage insurance premium) must be subscribed up to the first 20% of the payment of the selling price.
Buying a house generate other cost that are not always as obvious as the aforementioned ones.
First of all, some additional cost are linked directly with the request of a loan:
- land survey: in case a mortgage is required, the lender might ask for a "certificate of location" before granting the loan to check the state of the property at stake and its value.
- mortgage broker's fee (or legal fees if done by a lawyer): a mortgage broker can be hired to make sure that the best type of mortgage is selected accordingly to the type of property and to the desire of the buyers. A fee will however be charged for this type of services.
- insurance: the lender is likely to ask for the lender to provide them with a proof that the accommodation will remain insured against all type of damages once the ownership changes.
Regarding insurance, it might be a good idea to do a bit of research regarding different hazards (be them natural or not) that are likely to happen in the area in order to make sure to have potential damages covered.
And other costs concern the accommodation as such, and include:
- a title insurance that will cover for any problems happening to the title as such (the costs are usually relatively low)
- a home inspection fee: it is in the best interest of the buyer to have an inspection being carried out to reveal any problems akin to the accommodation
- the land transfer tax can be not negligible and will vary from state to state. For instance, it amounts up to 0.01% of the total value of the acquired property in Colorado, but to 4% in Pittsburgh.
Regarding tax, foreigners are enticed to pay federal income tax on real property interests, and can be subject to state income (if if federal income tax does not apply) and estate tax. Nonresident foreigners are not taxed on their worldwide income but simply on revenues that originated from the US.
The estate tax can be as high as 45% and is evaluated on the base of citizenship, domicile, type of assets. Exemptions up to $2 million for US citizens and $60,000 for foreigners are possible. Moreover, in order not to be subject to a 10% withholding tax, you should have an individual taxpayer identification number of US Social Security number. More details can be found under: