Buying a house in the USA

Would you like to fulfill your American residential dream of buying a house in the USA? We explain the steps you need to take when purchasing real estate in the United States.

Homeownership in the USA

Buying a house is very common in the United States. In fact, most residents of the United States are homeowners. In 2021, the rate of people owning a home in the USA was about 65.4 %.

If you have already decided that you want to stay for a longer period of time in a certain place, buying real estate is even cheaper in many cases than renting an apartment on a long-term basis.

Types of real estate in the USA

What do you want your American dream home to look like? If you dream of buying a house in the United States, you need to figure out what type of property you would like to reside in in the future. Typically, in the United States, there are:

Condos

Condominiums, or condos, are usually found mainly in urban areas. They have one or more rooms, a kitchen, a bathroom, and in some cases, a balcony.

By the way, apartment ads in the US only specify the bedrooms. The kitchen and living room are considered self-evident. So when you see an offer for a 1 bedroom apartment, it actually has two rooms (living room as well as a bedroom). Apartments that consist of just one room are called "studios" in the USA.

At times, condominiums are located in apartment complexes that also include fitness rooms, tennis courts, a pool, or a clubhouse.

Townhouses

Townhouses are tall and narrow buildings that are constructed side by side to save space. They have small backyards and are designed for living in urban areas. Townhouses are generally also attached houses.

Attached houses

Attached houses or multi-family homes are buildings that have connecting walls to the neighboring houses on both the left and right sides. They usually include a small garden behind the building and an inviting entrance area in front of it.

Semi-attached houses

Another widespread form of housing is semi-attached houses. We talk about a semi-attached house when two separate independent buildings are divided by a so-called firewall, i.e., two houses are connected only in the middle. A characteristic feature of a semi-attached house is that both halves are symmetrical.

Detached houses

Detached houses, also called single-family homes, dominate in rural areas and suburbs. These are freestanding residential buildings in which only one family lives. They usually have a garage, a driveway, as well as front and back yards.

Bungalows

Bungalows are small single-family homes. Typically, they are square, have one floor only, and are found mainly in American suburbs.

Tiny Houses

Minimalist and cost-saving tiny houses are a new trend in the United States. According to the 2017 US Building Code, tiny houses may have a height of 4.11 m and a floor area of up to 400 square feet (about 37 m2). In the USA, tiny houses can be stationary or mobile, meaning they can be towed by a car like a trailer.

How much does a home in America cost?

The question of what an average home in the USA costs cannot be answered briefly. Real estate prices vary greatly depending on the state and the environment.

Development of real estate prices in the USA

In general, one can see that real estate prices in the USA have risen sharply over the past 40 years. If the sales price for an average home in America in the 1980s was still around $ 64,000, it averaged around $ 429,000 in the first quarter of 2022.

A short-lived decline in real estate prices in the USA was observed after the financial crisis in 2008. Numerous financial experts assume that a similar development will occur as a result of the key interest rate increases decided by the Federal Reserve in 2022. Although the real estate price has already fallen slightly in July and August 2022, it is still not possible at this point to say exactly what the actual development will be in the coming years.

Where can you find the cheapest real estate in the USA?

The purchase prices for apartments and houses in America vary enormously from state to state. For example, an average home in the most expensive state of Hawaii currently costs about 7.5 times as much as a property in the most affordable state of West Virginia.

In addition, there are major differences depending on the surrounding area: while major cities and popular locations, e.g., near the beach, have high prices, housing in rural areas is comparatively inexpensive.

This is what the average home in the USA cost in July 2022:

• West Virginia: $ 137,000
• Mississippi: $ 164,000
• Arkansas: $ 178,000
• Oklahoma: $ 182,000
• Iowa: $ 193,000
• Kentucky: $ 198,000
• Alabama: $ 205,000
• Kansas: $ 206,000
• Ohio: $ 213,000
• Louisiana: $ 215,000
• Indiana: $ 221,000
• Missouri: $ 231,000
• Michigan: $ 234,000
• Nebraska: $ 240,000
• Wisconsin: $ 267,000
• Pennsylvania: $ 268,000
• Illinois: $ 270,000
• North Dakota: $ 282,000
• South Dakota: $ 292,000
• South Carolina: $ 293,000
• New Mexico: $ 296,000
• Tennessee: $ 298,000
• Texas: $ 315,000
• Georgia: $ 318,000
• Wyoming: $ 321,000
• North Carolina: $ 322,000
• Alaska: $ 337,000
• Minnesota: $ 340,000
• Delaware: $ 355,000
• Vermont: $ 359,000
• Maine: $ 361,000
• New York: $ 376,000
• Virginia: $ 379,000
• Connecticut: $ 383,000
• Florida: $ 416,000
• Maryland: $ 416,000
• Rhode Island: $ 443,000
• Montana: $ 450,000
• New Hampshire: $ 451,000
• Arizona: $ 459,000
• Idaho: $ 476,000
• New Jersey: $ 480,000
• Nevada: $ 485,000
• Oregon: $ 535,000
• Utah: $ 589,000
• Colorado: $ 605,000
• Massachusetts: $ 612,000
• Washington: $ 640,000
• Kalifornien: $ 817,000
• District of Columbia: $ 826,000
• Hawaii: $ 1,039,000

Buying a house in the USA as a foreigner

Buying a house in the USA is possible and even fairly easy not only for American citizens and Green Card holders but also for foreigners.

If you do not have US citizenship or a Green Card, then you have the option of applying for an Individual Taxpayer Identification Number (ITIN). With this, foreigners who are not able to obtain a social security number can obtain a tax number.

Contact the Internal Revenue Service (IRS), an agency within the US Department of the Treasury, to request an ITIN. They will ask you to complete the W-7 Form. Depending on your nationality, you may also need a valid passport or other identification documents (e.g., a driver's license) and a valid visa.

Step by step guide to buying a house in the USA

To buy a house in the USA, you will roughly follow these steps:

Plan your budget

The first step to buying a house in the USA is to plan your budget. Estimate how much money you have available and how much you need to buy a house.

If you do not have enough money to buy a property, consult your bank for information on obtaining a loan. However, before you contact a bank, check your credit score.

Search for offers

To hunt for the right property, you have several options. These include, for example, various online portals. Among the best websites for real estate search are:

• zillow.com
• realtor.com
• trulia.com
• foreclosure.com
• apartments.com
• fsbo.com
• homesforheroes.com

However, you can also seek the help of brokers (realtors or real estate agents) or real estate agencies that will assist you in finding and buying a house in the USA.

In addition to the price and the type of property, also look at the location of your potential new home. For example, assess in advance its access to public transportation, stores, schools, parks, and other amenities.

Get professional advice

Each of the 50 US states establishes its own laws regarding real estate acquisition. Once you have decided on a state to live in, you should seek advice from an attorney or a broker. They will advise you on all of the state's regulations, tax requirements, necessary paperwork, and legal issues.

Compile your documents

After you have fully researched the regulations in your desired location, you can begin to gather all the documents necessary when buying a house in the USA. As a rule, you will need:

• Proof of identity (e.g., US driver's license, Green Card)
• Social security number or Individual Taxpayer Identification Number (ITIN)
• Bank statements
• Pay statements
• Tax return forms
• Additional documents, if applicable (depending on state and personal situation)

Find a new home

It's now time to personally tour the houses that qualify as your future home. Once you've found the property of your dreams, it's time to declare your interest. Make an offer and begin negotiations. Then, have the purchase agreement sent to you and make the first payment, if necessary.

Conclude the contract

For the closing phase of the home purchase, you can also hire a closing agent. This agent will help you review all necessary documents and arrange payments prior to the conclusion of the home purchase.

Budget about 1 to 2.25 % of the total home price on top for additional costs involved in the home purchase in the United States. These may be for:

• Settlement and notary fees
• Legal fees
• Certification fees
• Insurances

If you are not in the United States, you do not necessarily have to enter the USA to conclude the purchase, but you can also issue a power of attorney. In doing so, you authorize another person to represent you and sign on your behalf.

Contact the utility companies

The purchase contract for your house in the USA is signed and sealed? Congratulations! Before you can move into it, you now need to contact the necessary utility companies to set up an account. This involves:

• Water
• Electricity
• Gas
• Telephone / Internet
• Cable TV

In most cases, utilities will require the following documentation to set up your customer account:

• Valid proof of identity (e.g., US driver's license, Green Card)
• Proof of ownership of the property
• Credit score
• Proof of US bank account
• Social security number, if applicable
• Proof of employment, if applicable

More tips for the USA

Buying a house in the USA is not yet an option for you? Then take a look at our guide to renting an apartment in the United States. Also, sign up for our The American Dream newsletter, which brings the latest America news to your inbox every week!