You don’t have to be a US citizen or a resident to buy property in the US. In fact, foreign investments in US real estate, just for the period between 2021-22, have surpassed $55 billion dollars. Some of those investments were cash-direct, but others were financed through various types of mortgage loans, including the one that is the main topic of this article — foreign national mortgage loans.
What Is a Foreign National Mortgage Loan?
A foreign national mortgage loan is a type of non-qualified mortgage that is available to all nonresidents who want to buy a house in the US. Similarly to other non-qualified mortgages, (like DSCR loans), foreign national mortgage loans aim to provide financing options to people who don’t qualify for regular mortgage loans — either because their income is too low or because they haven’t yet established a good enough credit score in the US. For example, even though DSCR loans don’t exist in Canada, Canadians can get a DSCR loan for investment in US real estate.
Foreign national mortgage loans usually have a downpayment of 20-25% (sometimes even more). And, they usually have a bit higher interest rates when compared to regular mortgages. But, besides these downsides, foreign national mortgage loans are still a really good option for people who are looking to buy their primary home, or to invest in a rental property.
What Are the Requirements for a Foreign National Mortgage Loan?
To get a foreign national mortgage loan you’ll need to have proper documentation.
For the most part, that will include:
There are many different types of visas that can qualify you for a foreign national mortgage. The most common types of visas include:
- B-1 Visa — For nonresidents who want to stay in the US for a short period of time and engage in business activities;
- B-2 Visa — For tourists or nonresidents traveling to the US for medical or other reasons (visiting friends, family, etc);
- O Visa — For foreign nationals that have shown exceptional ability or have achieved above-ordinary results in their chosen field or profession.
- H-1B Visa — For nonresidents who want to come to the US and work (usually doctors, engineers, developers, etc.)
- L Visa — For workers in multinational companies that want to move to the US branch of the company (most commonly managers or executives).
- H-2A and H-2B Visas — For temporary workers in seasonal industries (agriculture, hospitality, etc.)
- F-1 Visa — For foreign students that are attending classes in schools located in the US
Valid Passport and Copy
Apart from having a valid passport from their home country, anyone who wants to get a foreign national mortgage loan also needs to prepare a copy of their passport.
SSN or ITIN
To get approved for a foreign national mortgage, nonresidents need to have one of the two following numbers:
- SSN or Social Security Number — A nine-digit identification number that’s unique to each person. This number is issued by the United States Social Security Administration (SSA).
- ITIN or Individual Taxpayer Identification Number — A unique tax processing number issued by the Internal Revenue Service (IRS). ITINs are given to people who need to have some form of identification (mostly for tax purposes) but are not yet eligible to get an SSN.
We should also note that SSN is much more difficult to get when compared to ITIN. The latter is not only easier to obtain but can also allow nonresidents to build their US credit history.
The team at NRI specializes in helping foreign investors purchase property in the US. We are a one-stop-shop for all nonresidents looking to buy real estate in the US and can help you every step of the way — including getting an ITIN.
Payslips or W2s
A payslip (paycheck stub, salary slip) is an official document that employers give to their employees (most typically biweekly or monthly). Apart from general employee details (name, address, employee ID…), a payslip also contains information about the employee’s earnings and deductions — the part that the foreign national mortgage lenders are most interested in. Lenders will use the information about earnings to determine the loan amount, and, in some cases even the interest rate and the downpayment amount.
Similarly to payslips, W2 forms are official documents that most employers operating in the US have to send to both their employees and the IRS (Internal Revenue Service), once each year. This document contains details about employees’ yearly income and deductions and is used by lenders to calculate the loan amount they’ll be most comfortable with.
Most commonly, the downpayment for foreign national mortgage loans will be in the range of 20-25% of the property’s original value. Now, it’s important to mention that this can vary, depending on the lender and other specific circumstances (the borrower’s yearly income, exact location of the property, type of property, etc.). Because of that, there will be some lenders that could require a downpayment as high as 40% (this doesn’t happen often, but it does happen).
To calculate the amount needed for a downpayment you should:
How to Calculate Downpayment?
Let’s say that you want to calculate the 20% downpayment for a property that’s worth $200,000. To do that, you can follow the formula:
Downpayment = $200,000 x 20 / 100
Downpayment = $40,000
If this dealing with formulae is not up your alley, be sure to check out our free downpayment calculator below.
International Credit Report
Some lenders may require credit reports from the borrower’s country of origin. Meaning, that if the person looking for a foreign national mortgage loan doesn’t have a US-based credit score, they might have to get their full credit history from their original country. Other nations that also use the credit score system include:
- United Kingdom;
Different countries use different systems to determine creditworthiness. So, even if you don’t live in one of the above nations, there still might be a way to get your international credit report or equivalent of it. The main thing to note here is — if you can get any documents from your home country that include details about your loan repayment history, you should probably try to get them.
How to Get Foreign National Mortgage Loan in the US?
Getting a foreign national mortgage loan is a complicated process. To make it easier for you to navigate through it, we’ve created the following step-by-step guide.
But, before we begin, we should mention that the outlined steps can vary between lenders and can depend on your exact situation. The steps should be looked at as a general overview of the whole process of applying for a foreign national mortgage.
Step 1 — Calculate Your Budget
Before you start the process of getting a foreign national loan, you should first determine your budget. To do that, try to find answers to the following questions:
- How much money do I have for a downpayment?
- What is my monthly income?
- What is the maximum amount of money I can spend each month on repaying the loan?
Another thing that you should take into account when calculating your budget is all the additional costs of actually owning a property. Costs, such as:
- Property taxes;
- HOA (Homeowners Association) fees;
- Homeowners insurance;
- Repair and maintenance costs;
Make sure you earn enough money to cover these costs, as well as interest and principal payments on the loan.
After you’ve done that with estimating your budget, it’s time to move on to the next step.
Step 2 — Prepare the Necessary Documentation
The process of applying for a foreign national mortgage loan requires a lot of documentation. To make the whole thing go a lot smoother, you should prepare those documents beforehand. For the most part, what you’ll need is:
- A valid passport and copy;
- US Visa;
- Employment information for at least two previous years;
- Residency information for at least two previous years;
- If you don’t live in the US, you’ll most likely need International Credit Report;
- Proof of income (various types of statements, payslips, or proof of assets);
After you’ve done that with estimating your budget, it’s time to move on to the next step:
Step 3 — Get Preapproved for the Foreign National Mortgage Loan
After you get all the documents ready, the next step is to contact as many lenders that deal in foreign national mortgages and get preapproved for the loan. These lenders will assess your particular situation, and will give you their initial assessment of whether or not you meet the requirements for this specific type of loan.
Getting preapproved is important as it will help you in your search for the property — You’ll know how much money you can afford to spend on it, which will send a signal to real estate agents that you’re a serious buyer.
After getting preapproved, you should then:
Step 4 — Look for a Property and Bid for It
The preapproval process is done and you are looking at starting the next step of getting the foreign mortgage loan — find the property you want to purchase and make an offer for it. There are two ways that you can go about this particular step:
- Find the property on your own;
- Hire a real estate agent to help you find the property;
Both have their own pros and cons. Whereas doing it on your own can be less costly (in terms of money) it can be more time-consuming. And, if you don’t have experience in house hunting or real estate, you might not get the results you were initially looking for.
On the other hand, if you end up hiring a real estate agent you will have to pay a commission (usually about 2,5% for the buyer). But, on the plus side, you’ll be working with a professional whose job is to find you the best possible deal for your money.
After you find the property you like, it’s time to make an offer for it.
We work with a vast network of real estate agents that specialize in finding properties for foreign nationals.
Step 5 — Turn Preapproval Into Approval
For this step of getting a foreign national mortgage loan, all you have to focus on is turning that preapproval into approval. The things you should consider are:
- The exact type of loan you want to get;
- The interest rates;
- The exact amount you’ll need for the downpayment;
- The length of the specific loan (usually between 20-30 years);
Before getting approved some lenders will conduct a property appraisal to ensure the value of
the property you’re interested in is on par with the current market value (and that the seller is asking for a fair price).
After you hammer out the exact details of the foreign national mortgage loan with the lender, you’ll be well on your way to owning property in the US.
Step 6 — Close the Deal
You’ve got all the documents and the lender has approved you for the loan. All that’s left to do is — close the deal and become a new owner of a US property.
What do I need to get a mortgage loan?
Requirements for a mortgage loan can vary, depending on the exact type of loan. But, for the most part, to get a mortgage loan you’ll need:
- Proof of income;
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN);
- Credit history or equivalent (if you are not from the US);
- Money for downpayment;
- Information about the property you’re looking to buy;
What is a non-qualified mortgage loan?
A non-qualified mortgage (non-QM) is a type of loan that doesn’t meet the requirements set by the Consumer Financial Protection Bureau (CFPB). The main benefit of non-QM loans is that they are accessible to a wider pool of borrowers, as they have fewer requirements than regular QM loans.
Can nonresidents get a mortgage loan in the US?
Yes, but the whole process of getting a mortgage loan as a nonresident can be more difficult when compared to what the US citizens have to go through.
Need Help Getting a Foreign National Mortgage Loan?
Are you searching for financing options to buy a property in the US? A foreign national mortgage loan might be the thing for you! And, if you need help finding the best deals available, our team at NRI can assist you.
As a mortgage broker licensed in all 50 states, we specialize in dealing with foreign nationals. We can assist you in getting the best financing deal for your property.Our mortgage specialist will analyze your case and connect you with lenders all across the US. They’ll further help you sort through all the loan offers, compare them, and choose the one that best suits your needs.
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