For many immigrants, owning a home in the United States is a symbol of achieving the American Dream. However, this dream can be challenging if you don't have a good credit score — or any credit score.

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At Cheese, we understand the importance of credit building in realizing homeownership goals. As an immigrant-founded company, we know firsthand how crucial it is to improve one's creditworthiness, especially for those new to the country without any credit history. 

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That’s why we’ve created this homebuying guide for immigrants and filled it with tips on how to build credit and improve your chances of homeownership. We'll discuss the challenges immigrants face in obtaining credit and provide tips on using Cheese Credit Builder to build a good credit score.

The Unique Challenges of Immigrant Homeownership

Pursuing the American dream of homeownership is an expensive, exhausting journey for anyone, but for immigrants, the journey comes with unique challenges. 

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While navigating a complex and unfamiliar system, many immigrants face discrimination, language barriers, and cultural differences that add to the already complex process of buying a home.

Discrimination

Immigrants often face discrimination when trying to buy a property from lenders, sellers, or even real estate agents, who may be less willing to work with them due to their ethnicity, language, or immigration status. 

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The National Fair Housing Alliance received over 30,000 reports of incidents of housing discrimination in 2022 alone, with race and national origin accounting for over 22% of all complaints. 

This puts immigrants at a disadvantage when trying to find a home in desirable neighborhoods, negotiate better prices, or access credit.

Limited Credit History

Credit history is a crucial factor when qualifying for a mortgage, and without a solid credit score, lenders will be less willing to grant a loan. 

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Unlike individuals born in the US, immigrants may not have records with credit bureaus, and their lack of credit history can significantly impact their ability to obtain a loan.

Language Barriers

Buying a house requires skimming through reams of legal documents, contracts, and agreements, which can be overwhelming and challenging if you don’t understand English fluently. 

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Not to mention that negotiations and communication with real estate agents, sellers, and lenders can be difficult if you don’t speak the same language.

The Importance of Building and Maintaining Good Credit

Overcoming these obstacles isn’t impossible, but it does start with building and maintaining a good credit score.

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Your credit history reflects how responsible and reliable you are in managing debt. Lenders use your credit score to determine your creditworthiness and, ultimately, decide whether to approve your loan application. 

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The bottom line? A good credit score can help you secure lower interest rates and better loan terms and save you money in the long run (we’ll provide you with a sample in just a second).

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It’s not just about accessing great mortgage rates, though. Having good credit also opens doors to other financial opportunities that are a part of the American Dream for immigrants, such as getting approved for credit cards, car loans, and personal loans.

Good Credit & Mortgages

Since this is a guide full of immigrant homebuyer resources, we want to stress the importance of having a good credit score when applying for a home loan. Your credit rating is one of the most critical factors that lenders consider when approving you for a mortgage. 

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As mentioned, a high credit score can help you secure a lower interest rate on your loan. This means you'll pay less interest over the life of the loan. A lower interest rate can also save you thousands of dollars in monthly payments. 

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For example, a borrower with a credit score of 760-850 could get a 30-year fixed-rate mortgage with an interest rate of 2.875%, while someone with a score in the 620-639 range could get a rate of 4.719%. Over the life of a $300,000 loan, the difference between the two rates is nearly $110,000. 

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In addition to a higher interest rate, a lower credit score may result in:

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• Stricter loan terms
• A larger down payment
• Disqualification for a loan

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Ultimately, as you can see, building and maintaining good credit ensures you're getting the best mortgage loan rates and terms available.

Immigrant-Friendly Mortgages: Three Great Options

Are you an immigrant dreaming of owning a home but worried about your credit score? Traditional mortgage loans can be difficult to obtain without a solid credit history, but you’re in luck — there are non-traditional options available to help you achieve your American Dream. 

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Here are three great choices for immigrant-friendly mortgages:

FHA Loans

The Federal Housing Administration (FHA) offers loans to first-time buyers, those with lower credit scores, and those who can’t afford a large down payment. 

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With an FHA loan, you may only need to put as little as 3.5% down on your home purchase. Additionally, lenders who work with the FHA are willing to lend to those with credit scores as low as 580.

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Overall, immigrants often favor FHA loans because they are easier to qualify for and require less upfront investment. Keep in mind, though, that you’ll have to pay mortgage insurance premiums with this type of loan.

VA Loans

If you are a current or former military member or the spouse of someone who is, you may qualify for a VA loan. These loans are backed by the Department of Veterans Affairs (VA) and are designed to help veterans achieve their dreams of homeownership. 

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VA loans do not require a down payment or mortgage insurance, and credit score requirements can be as low as 500.

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The VA loan guarantee allows lenders to offer lower interest rates than traditional mortgage loans, making it easier for a person to buy a home and meet their financial goals.

USDA Loans

The United States Department of Agriculture (USDA) offers loans to eligible borrowers in rural and suburban areas who meet certain income and credit requirements. 

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USDA loans provide 100% financing and don’t require private mortgage insurance. Credit score requirements can often be lower than with traditional loans. All in all, if you’re looking for an affordable way to own a home outside of a major metropolitan area, a USDA loan may be an excellent choice. 

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As a bonus, USDA loans also offer attractive interest rates and flexible credit standards, making it a great option for immigrants with lower credit scores.

Immigrant-Friendly Credit-Building Tips

Building credit from scratch is difficult for most immigrants, but it's not impossible. By following these tips and staying on top of your finances, you can start establishing a solid credit history and work towards achieving the American dream of homeownership. 

Open a Bank Account

The first thing you need to do when moving to the United States is to open a bank account. You’ll need this to start saving money and building a US-based financial transaction history. 

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You’ll also need a bank account to apply for loans or a credit card eventually. Some banks even offer credit-building programs to help immigrants establish credit. Research banks in your area (or check out an app like Cheese) to find out about their account opening policies and options.

Use Secured Credit Cards

Unlike traditional credit cards, secured credit cards require an upfront security deposit, which serves as collateral if the user defaults on the payments. 

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However, if you can afford the $200 deposit (sometimes lower), these credit cards are a quick and simple way to kickstart your credit-building journey. After providing the deposit to open the account, you can use the card to build credit with that deposit as your credit limit.

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How do you build credit as an immigrant with a secured credit card? By making timely payments that get reported to the major credit bureaus, you’ll build a history of good financial habits. However, you’ll want to research the terms and fees before choosing a secured credit card.

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Pay Your Bills On Time

This credit-building tip applies to citizens, residents, and everyone in between but can be particularly helpful for immigrants who are working towards building good financial habits to eventually apply for a mortgage loan.

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Late payments can significantly lower your credit score and make it harder to get approved for loans and credit cards in the future. Set up automatic payments for all your bills to ensure you never miss a payment.

Reduce Credit Card Balances

One common mistake immigrants make is using their credit cards too frequently. While credit cards can help build credit, carrying a high balance can hurt your credit score. 

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Ideally, you should keep your credit utilization rate below 30%. If you have a high balance, try to pay it down as soon as possible. Limiting your credit card usage and instead relying only on cash or savings can also help you avoid incurring credit card debt.

Building Credit for Immigrants: Cheese Credit Builder

Establishing a positive credit history is one of many stepping stones toward the American Dream, and Cheese Credit Builder has made it easier than ever. 

By making on-time payments to a deposit account, you can easily and quickly build your credit while building up your savings. With flexible repayment plans and no hidden fees, Cheese Credit Builder is the go-to choice for immigrants looking to achieve their dreams. 

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Sign up now and start building your credit today!

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