No federal law stops a foreign citizen from buying a home or investment property in the United States, and if you are wondering how to buy property in the USA as a foreigner, the process tracks the same offer, inspection, and closing steps a domestic buyer follows. What changes for you is the paperwork at the front end, the mortgage terms, and a set of federal tax rules that do not apply to U.S. citizens. Get those three things right and the rest of the transaction is ordinary.
Identification and a U.S. Taxpayer Number
A valid passport is the identification most foreign buyers use throughout the transaction. If you plan to travel to the U.S. to view properties, you will typically enter on a B-1 or B-2 visa, which cover business and tourism visits.
You also need a U.S. taxpayer identification number before closing. If you are not eligible for a Social Security Number, you apply for an Individual Taxpayer Identification Number by filing IRS Form W-7 with a certified passport copy proving your identity and foreign status.1Internal Revenue Service. Individual Taxpayer Identification Number (ITIN) Start this early. Lenders, title companies, and the IRS all need the number before the deal can close, and processing takes time.
Buying in Your Own Name or Through an Entity
One of the first decisions is whether to take title personally or through a U.S. legal entity such as a limited liability company. A domestic LLC separates the property’s liabilities from your personal and overseas assets, so a lawsuit tied to the property reaches the LLC rather than your other holdings.2SelectUSA Investor Guide. Business Structure: An Overview of Common Business Structures for Foreign Investors
The tax consequences shift with the structure. A foreign corporation holding U.S. property faces a 30% branch profits tax on the dividend equivalent amount on top of regular income tax, though a treaty may reduce the rate.3Office of the Law Revision Counsel. 26 USC 884 – Branch Profits Tax A single-member LLC owned by a foreign person avoids that second layer but must file Form 5472 each year. The penalty for failing to file, or filing substantially incomplete, starts at $25,000 and adds another $25,000 for every 30-day period the failure continues after the IRS sends notice.4Internal Revenue Service. Instructions for Form 5472 Because the trade-offs between liability protection, tax cost, and compliance vary with your situation, this is a decision to make with a CPA or international tax attorney before you sign anything.
Financing the Purchase
Proving You Can Pay
Sellers will not take an offer seriously without evidence you can fund it. For a cash deal, that means recent bank statements or a letter from your bank showing a balance sufficient for the full price plus closing costs. For a financed deal, you need documentation of the down payment and reserves. Statements should be current and clearly show the account holder’s name.
Mortgages for Foreign Nationals
Foreign buyers without a U.S. credit file can still borrow, but the terms are tighter. Foreign national loan programs verify income through translated tax returns, employer letters, or foreign bank records. Down payments typically run 30% to 50% of the price, compared to the 3% to 20% a domestic borrower with strong credit might put down. Rates carry a premium as well; data from rated mortgage-backed securities shows investor property loans in the non-qualified mortgage category running roughly one percentage point above conforming rates in recent years.
A Debt Service Coverage Ratio (DSCR) loan is another common route for investment properties. Instead of qualifying you personally, the lender qualifies the property: rental income has to cover the mortgage payment. Most lenders want a DSCR of at least 1.0, and 1.25 or higher gets the best pricing. DSCR loans are for rentals, not homes you plan to live in.
Conventional financing is possible if you can build a U.S. credit profile through domestic bank accounts or if an international credit reporting service can supply your history. Whatever the loan type, expect the lender to look at your debt-to-income ratio and to require several months of cash reserves in an approved account before closing.
Offer, Inspection, and Closing
The Purchase Agreement
The purchase agreement is the binding contract. It names the parties, describes the property by legal description rather than only its street address, states the price and the earnest money deposit, and sets deadlines for inspection, financing, and possession. If you are buying remotely, have your attorney read every clause. Contingency deadlines are the ones to watch: missing one can cost you the right to walk away over a failed inspection or a denied loan.
Inspection and Appraisal
A professional home inspection turns up structural problems, safety hazards, and hidden issues like mold or water damage. If problems surface, you can negotiate repairs, ask for a price reduction, or exit the contract if the contingency allows.
If you are financing, the lender orders an independent appraisal by a state-certified appraiser who values the property against comparable sales and its condition.5eCFR. 12 CFR Part 34 – Real Estate Lending and Appraisals A low appraisal forces a choice: cover the gap in cash, renegotiate, or cancel.
Title and Closing
A title search checks public records for the seller’s ownership and for any liens, unpaid taxes, or legal claims against the property. Lenders require a lender’s title insurance policy. An owner’s policy is optional but protects you against ownership claims tied to events before your purchase, such as unpaid contractor bills or prior tax debts.6Consumer Financial Protection Bureau. What Is Owner’s Title Insurance?
At closing, an escrow agent or title company holds funds and documents until both sides have performed. You wire your final payment to the escrow account, and this is the point of greatest fraud risk. Criminals routinely hack real estate and title company email accounts to send fake wiring instructions. Always confirm wire details by calling a phone number you already know for the title company before sending money. Once you sign the deed, the escrow agent records it with the county to place you on the public record as owner. Financed closings usually run 30 to 60 days from signed contract to recorded deed; cash deals can move faster.
Federal Taxes That Apply Only to Foreign Owners
Several federal tax rules single out foreign property owners. Missing them produces penalties that dwarf what a qualified tax professional charges.
FIRPTA Withholding When You Sell
The Foreign Investment in Real Property Tax Act requires the buyer to withhold part of the sale price when a foreign person sells U.S. real estate. The general rate is 15% of the amount realized.7Internal Revenue Service. Definitions of Terms and Procedures Unique to FIRPTA The money goes to the IRS as a credit toward the capital gains tax you owe, and if the actual tax is lower you file a return to claim the refund. Reduced rates and exceptions exist for lower-priced properties the buyer intends to occupy as a residence, so get tax advice before any sale.
Reporting Rental Income
If you rent the property out, you file a U.S. return every year. Non-resident aliens use Form 1040-NR.8Internal Revenue Service. Nonresident Aliens – Real Property Located in the U.S. By default, gross rental income is taxed at a flat 30% with no deductions allowed. That is almost always the wrong outcome. Under IRC Section 871(d) you can elect to treat the rental as effectively connected with a U.S. trade or business, which lets you deduct management fees, insurance, repairs, mortgage interest, and depreciation, and pay tax on the net at graduated rates.9Internal Revenue Service. Instructions for Form 1040-NR (2025) The election stays in place until formally revoked. Most states with an income tax also require a non-resident return where the property sits.
Gift Tax
If a non-resident alien gifts U.S. real property, federal gift tax applies. The 2026 annual exclusion is $19,000 per recipient, with a $194,000 exclusion for gifts to a non-citizen spouse. Amounts above those thresholds are taxable, and non-resident aliens have no lifetime gift tax credit to offset the liability.10Internal Revenue Service. Frequently Asked Questions on Gift Taxes for Nonresidents Not Citizens of the United States The gift is reported on Form 709-NA.
Estate Tax Exposure
This is the biggest trap. A U.S. citizen’s estate gets a basic exclusion above $13 million before any estate tax applies. A non-resident alien who owns U.S.-situated assets gets an exclusion of $60,000.11Internal Revenue Service. Some Nonresidents With U.S. Assets Must File Estate Tax Returns Own a $500,000 property in your own name and die, and essentially the entire value can be exposed to federal estate tax at rates up to 40%. This risk is a leading reason foreign investors hold U.S. property through an entity rather than personally, though whether that works depends on how the entity is structured and whether a tax treaty applies.
Ongoing Costs of Ownership
Property taxes apply to every owner regardless of citizenship. Average effective rates across the 50 states range from roughly 0.32% to over 2.2% of assessed value, with a national average near 1%. On a $400,000 property, that is around $4,000 a year at the national average, and several times that in high-tax jurisdictions. The county assessor sets the value, and you can appeal.
Homeowners insurance is required by every mortgage lender and advisable even for cash buyers. Premiums rise sharply for properties in flood zones, hurricane-prone coasts, and wildfire areas.
If the property sits in a homeowners association, dues are mandatory. They range from under $100 a month in some suburban developments to several hundred dollars in amenity-rich condos. Review the HOA’s financials and reserves before buying, because a poorly funded association can hit owners with special assessments for major repairs.
Many states and localities charge a one-time real estate transfer tax at closing. Rates range from zero in some states to more than 1% of the sale price in others. Your closing disclosure will show the amount, but build it into your budget from the start if you may sell within a few years.
A Reporting Rule for Larger Investments
If you are buying a single home, the Bureau of Economic Analysis foreign investment survey almost certainly does not apply to you. It kicks in when a foreign person acquires a 10% or greater interest in a U.S. business enterprise, including a real estate holding entity, and the total acquisition cost exceeds $40 million; Form BE-13A is then due within 45 calendar days.12eCFR. Rules and Regulations for the BE-13, Survey of New Foreign Direct Investment in the United States Below the threshold a Claim for Exemption is still required. Civil penalties for skipping the filing run $2,500 to $32,500 per violation, with criminal penalties up to $10,000 and a year in prison for willful failure.13Bureau of Economic Analysis. BE-13 Claim for Exemption Investors building a portfolio through one entity can cross the $40 million line faster than they expect.