Many Nigerians migrate abroad; many leave to start a new career and a new life in Canada, the United States and Europe.

These new emigrants are highly educated and previously employed in Nigeria; they will form the cornerstone of the future middle class in their new nation.

Why is it important to buy a house

In a Washington Center for Equitable Growth article titled “The Distribution of Wealth in the United States and Implications for a Net Worth Tax”, the authors analyze the sources of wealth in the United States and who holds that wealth. From Chart 1, we can see that home equity is the source of wealth for the 25% to 99% percentile in America. The article has this interesting quote “Families with low and high wealth differ in terms of assets and liabilities. Cars and other vehicles account for most of the wealth of low-wealth families, and middle-wealth families hold much more of their wealth in equity. In summary, home ownership is the path to wealth in the United States. Buying a home and earning equity (the difference between your home’s value and what you owe) is a proven path to wealth in America.

Chart 1: Sources of Wealth in the United States

How do I become a homeowner in the United States?

First, it is essential to understand that the West has clear paths to ownership. Mortgage sectors are also well developed, and credit identification and rating are taken seriously. The West is also a credit economy, which means most transactions are done on credit, not cash. Below I will outline the steps to take if you are an immigrant and want to emigrate and buy a home. My example will be based on the American model. This process, in general terms, will also work in Canada and Europe.

Make sure you have a paper trail showing how the funds left your Nigeria to the United States. To buy a home, you must demonstrate the ability to repay a mortgage loan. The first step is to demonstrate that the funds in your bank account that you transferred from Nigeria to the West are legal and belong to you. So if you emigrate and sell your property in Nigeria, make sure the sellers write a check or make a direct deposit and deposit it in your bank account”. No cash transactions. Create a clear paper trail. If you have funds in your retirement savings account and you quit your job but have not yet reached the age of fifty, you can request up to 25% of your savings account balance pension to your pension fund administrator. Be sure to deposit these funds directly into your account, convert them to dollars by buying from the banks, and then transfer them to the United States.

These are the steps to follow.

1. Keep a written record, no cash transactions. If you receive a cash gift from your parents or employees, make sure you have a letter stating that these funds are a “gift” and will not be refunded. It is essential that you do these before you leave.
2. Open a bank account in the United States. You should open a bank account as soon as possible and use it. These funds from the sale of your assets in Nigeria, transfer them from your Nigerian bank to your US bank. Invest in a banking product like a certificate of deposit and leave it there. You demonstrate that these funds belong to you. You do not need to be a legal immigrant to open a bank account. Most US banks will accept an Individual Tax Identification Number (ITIN) from you to open a bank account.
3. Get a job; you must secure a position to provide verifiable proof of income. If you work for a formal entity, you will receive a pay stub and a W2; it’s easy. If, for example, you stay with your “uncle”, ask him to employ you and “pay” you for the odd jobs you do. If you babysit, get paid by check or direct deposit, not cash. Cash has no paper trail; checks and direct bank deposits leave an auditable paper trail. If your employer offers a retirement account like a 401k and matches your contribution, you must contribute because you get the match from your employee and reduce your taxable income. You can also tap into these savings to make a down payment for your home.
4. pay tax. You don’t need a social security number to pay taxes. You can get an ITIN and pay taxes. Your tax return is essential because it captures your verifiable income. Most US banks will ask you for two years of tax returns.
5. Apply for credit. The West operates on credit. To get a loan you need a credit score, but you need a loan to get a good credit score. If you are a new immigrant, you will not be eligible for a loan. However, you have options; you can ask your bank for a secured personal loan or a credit card. A secured loan means that you deposit your funds in the bank and take out a loan using that cash deposit as a loan. Apply for a secured loan if you have deposited the proceeds from the sale of your Nigerian assets. A most secure loan will not pull credit before offering you a loan. When you take out a loan, you must repay it no later than your loan repayment date. Getting a loan means you can then start building your credit, credit scores start from 450 to 850, and there are four credit bureaus. Your payment history and, unfortunately, late payments are reported to the offices when you take out a loan. The more regularly and on time you repay your loan, the higher your credit score, all other things being equal. Your goal is to get a minimum score of seven hundred. The higher your credit score, the lower the cost of any loan you take out, as expressed in the APR. If you have a credit card, you can max it out, but at the end of the cycle when you need to repay, make sure your card balance is brought down to no more than 30% of the unified line.

Diagram two from Homes for Hero’s shows credit scores and the impact on the interest rates you’ll be charged to buy a home

Chart 2: Credit Score

Let’s summarize if you follow this plan in 24 months, you have

1. Nigerian assets in a bank account
2. A new US bank account
3. A job with a verifiable means of income
4. Two-year tax returns
5. Credit score for two years.

After following the five steps above, you approach your bank to ask to be pre-approved for a loan to buy a home. A few points to note. As a first-time home buyer, you can put down a lower amount as a down payment for a home. However, if you are paying less than 20% as a down payment for a home, you may need to purchase Primary Mortgage Insurance (PMI) which adds to the cost of your loan.

When buying a home, always work with professionals and seek advice on the location of your home. Location and affordability are key determinants of choosing a location. If you have children, it’s also important to choose a home within a school district. Remember that not every region of America has a valued property.

In conclusion, rent and mortgage are both cash flows away from you; paying an agent does not provide you with any capital; paying a mortgage does. If you get a mortgage in a good neighborhood that’s less than or equal to your rent, that’s good.

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