NEW YORK CITY - The number of Latino homebuyers is on the rise. In 2022, over 48% of Latinos in the United States bought homes, according to the National Association of Hispanic Real Estate Professionals. Buying a home may seem like a far-fetched dream for many, especially if you identify as a non-resident alien, but it is possible. If you are an up and coming Latino homebuyer, this guide will help you find the best mortgages and home loans.
What is a Mortgage and How Does It Work?
A mortgage is a kind of loan used to purchase and maintain a home, plot of land or other kinds of real estate. The mortgage or a home loan works when a borrower agrees to pay the lender over time. These payments are divided by two: principal and interest. The property, such as the home, serves as collateral to secure the loan. A mortgage is used so that people can buy real estate without paying the whole price upfront.
It works when a potential Latino homebuyer applies for a mortgage through their preferred lender, and they must meet several requirements for example, a minimum credit score and a downpayment. Each mortgage and home loan is different, based on the needs of the borrower.
Mortgage Rates and Fees
Mortgage rates vary from lender to lender depending on the kind of home loan you get. There are two main kinds of mortgage rates: fixed-rate mortgages and adjustable-rate mortgages (ARMs).
- Fixed-rate mortgages are home loans in which the interest rate stays the same for the life of the loan. For example, the interest rate stays the same for 15-30 years. One of the advantages of having this loan is predictability — you won't be surprised with a higher rate if interest rates rise. However, lenders may charge a higher interest rate in the beginning.
- Adjustable-rate mortgages have a low interest rate in the beginning, but after a specific time, the rate can change according to the terms of the loan. For example, the interest rates could stay fixed for 10, seven or five years but then it will adjust every six months.
Why Latinos Face Challenges in Getting a Mortgage
Even though 48% percent of Latinos are home buyers, it hasn't come without challenges. Latinos often encounter higher mortgage denials, often because of debt-to income ratios or credit scores, according to the most recent Home Mortgage Disclosure Act data, making it challenging to secure a home.
Latinos who are non-Citizens, such as DACA dreamers or L-1 Visa Holders may find more obstacles when becoming homeowners, for example, they may lack credit history. A lack of credit history may turn lenders away as there is a larger risk of mortgage fraud. However, non-Citizens do have the possibility of finally becoming a Latino homebuyer.
There are two kinds of non-Citizens, each will have a different set of challenges when it comes to buying a home:
- Permanent Resident Aliens have both a social security number and a green card from immigration (USCIS) which allows them to have permanent residency in the United States. For permanent resident aliens, getting a mortgage or home loan can be easy when they provide a valid green card with their social security card along with other documentation needed.
- Non-Permanent Resident Aliens on the other hand, only have a social security number, but no green card. They'll need to prove their intention of living in and using the home as their primary residency. Non-Permanent Resident Aliens will also need to provide their Employment Authorization Document (EAD), also known as a work permit along with their social security number.
In the case the borrower does not have an EAD, they'll need to provide a special visa sponsored by an employer. The list of visas acceptable are: the H-1B and other H series visas (such as the H-1C, H-2, H-3, and H-4). The Canadian and Mexican NAFTA series, E series, G series, L series, NATO series and the O series visas.
All documents must prove the potential home owners ability to live and work in the US for at least three years. Depending on their case or situation, they may be asked to provide other kinds of documentation.
Best Mortgage Lenders for Latinos in 2024
There are a variety of loans available for Non-Permanent Resident Aliens and Permanent Resident Aliens who want to become first time Latino homebuyers. FHA loans and VA loans are the best kind, here is a summary of each:
FHA Loans
FHA loans are issued by the Federal Housing Administration (FHA) and are a government-backed mortgage. This home loan allows borrowers to pay a low down payments of 3.5% of the property — only if their credit score is 580 or higher. It allows them to pay 10% if their credit score is between 500 and 579.
FHA loans require mortgage insurance which costs 1.75% of the loan amount up front and then an additional 0.45% to 1.05% annually.
US citizenship is not required to apply for this loan, a person can be a Non-Permanent Resident Aliens as long as they provide proof mentioned above.
VA Loans
VA Loans are backed by the U.S. Department of Veterans Affairs (VA) and come with no down payment or mortgage insurance requirements. Cap lender fees are 1% of the total loan amount. To be eligible for a VA home loan, you need to be an active-duty service member, veteran or eligible surviving spouse.
Only Permanent Resident Aliens can apply for the loan — a green card is a prerequisite for VA loan eligibility. Potential borrowers must show proof of the documentation mentioned above and show a certificate of eligibility (COE), which is a document prepared by the VA that shows they qualify for the VA home loan benefit.
Bottom Line
Depending on your immigration status, It is possible to finally become a first-time Latino homebuyer. If you have your down payment (except for the VA loan) you're already one step closer to buying your home.
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