Written by Carrie Smith, an expert freelance finance writer or small business writer, who's written for everyone from The Huffington Post to Glamour. Proudly self-described as the #girlboss behind the Careful Cents brand, a community of solopreneurs and freelancers who are committed to building life-centered businesses.
Moving to the US is an exciting time. Your future is full of potential and you get to start a brand new life.
The first step to realizing the American Dream is finding a place to live. According to the National Association of Realtors, international buyers account for 6% of total US home sales in value.
It’s important to be prepared financially, whether you’re buying or leasing. If you’re searching for a US home – be it an apartment or house – here are 11 common financial mistakes to avoid.
1. Not securing a Tax Identification Number
The good news is that the United States allows individuals to purchase or lease a home without being a citizen.
In fact, you don’t even have to show a Green Card. But you’ll need to secure an Individual Tax Identification Number (ITIN). This is a tax-processing ID number that allows foreign nationals to purchase property and function in the US economy.
To get one, simply fill out Form W-7 and mail the request to the Internal Revenue Service (IRS). You will be required to give a valid reason for requesting an ITIN and may also have to provide a photo ID, visa or passport.
2. Forgetting the right financial information
A large part of finding a home or apartment in the United States relates to getting pre-approved for financing.
This is especially important if you’re a homebuyer as you want to work with a finance company who can get you the best interest rate. If you’re unable to obtain financing then there’s no reason to move forward with the homebuying process. You must first improve credit in order to obtain the funding you need.
The same advice applies to leasing an apartment. Before beginning your apartment search, contact various landlords to make sure you can afford their terms. Some landlords charge a security deposit to be paid upfront, which is usually one month's worth of rent (but can be more). Your new landlord may also request past tax returns to verify employment status, and other proof of income.
3. Overpaying to transfer your money internationally
Moving country can ending money back and forth abroad often comes with high fees. One way to circumvent this is by using TransferWise.
For example, here's how TransferWise compares to some of the biggest banks in the US for sending dollars to euros:
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4. Misunderstanding the contract terms
Whether you’re buying or leasing, make sure you read the contract terms carefully.
Avoid paying unnecessary fees or agreeing to terms you don’t like. For example, understand exactly what is included with the rent or mortgage payment. Are there Homeowner’s Association fees (HOA) that must be paid every month? Are utilities like electricity included with the monthly rent?
Read the entire contract before signing. Give any questions to the real estate agent as they will be able to give you unbiased advice.
5. Not creating a long-term budget
Start with a sensible budget plan. How much house can you afford?
Too many new homebuyers and renters get caught in the trap of letting the finance company tell them how much they can afford, simply because they’re pre-approved for a certain amount. Don’t fall for this common financial mistake!
Never take on too much financial responsibility. A good rule of thumb is to set aside no more than 25-30% of your monthly income on housing costs. This includes your mortgage or rent payment, repairs and upgrade costs, and insurance.
6. Forgetting about hidden fees
This is another common financial mistake to avoid.
In the UK, for example, a real estate agent usually charges a commission fee of around 3%. In the US however, there may be multiple real estate agents involved, causing the commission to be upwards of 6%.
Other hidden fees that you may be unaware of include appraisal fees of the property before purchasing or leasing, closing costs, property taxes, parking fees and even moving expenses.
7. Doing little research of the area
Nothing is more frustrating than finding a great place to live only to be disappointed by the location.
This is especially important if you expect to have children. How will the neighborhood effect them? Are there good schools in the area?
Another important consideration: what forms of public transportation are near? You couls save a lot on gas and car maintenance over time. And don’t forget about the crime rate and proximity to shops or restaurants. You can always update your house but you can’t change the location.
8. Mismanaging utility provider transfers
Moving to a new place means transferring or discontinuing many of your monthly bill services.
Utility providers need to be contacted ahead of time so you can schedule a date to transfer over your internet, cable TV or electricity accounts.
If you don't do this, you could be without electricity, running water or heat/cooling on move-in day.
9. Forgetting to check your credit history
Likely one of the most important factors that impact the buying or leasing process of finding a home in the US is your credit history.
Both your history with borrowing and repaying money equates to a credit score that financial companies and landlords look at it order to determine your eligibility for getting a home.
As an expat, you won’t have a credit history when first moving to the United States so it’s smart to build up one in a wise but efficient way. The best way is simply pay all of your bills on time and borrow credit responsibility -- never overextend your finances. And be sure to check your credit score frequently to ensure all the information is correct and moving in the right direction.
These resources allow you to view your credit score for free:
- Credit Karma
- Credit card customers
10. Not getting home or renter’s insurance
As a homeowner or renter, you want to keep your possessions protected, from nature, accidents and theft.
A simple online search will yield comparison sites where you can apply for the best insurance.
The mortgage company may also suggest the amount of coverage you need in accordance with the loan amount. As for renter’s insurance, you basically add up the total value of your possessions and make sure the policy covers the entirety.
11. Not updating your current address
Once you’ve secured the contract, and are ready to move into your new place, don’t forget to change your address.
Of course, you’ll want to share your new address with friends and family but it’s also important to update any bills and financial accounts.
Here’s how to get started:
- Start by heading to the USA website
- Click on the local Postal service section and apply for a Change of Address (you can also apply in-person)
- Request a free Mover’s Guide that encloses all the forms to fill out
- Contact other government agencies and financial companies
- Have your mail forwarded or put on hold if needed
That’s it! Now you’ll receive all of your bills, financial documents and other important mail at your new home address.
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