US mortgage finance for foreign nationals and non-residents

US mortgage finance for foreign nationals and non-residents

Islay Robinson

Over the years we have seen a significant increase in worldwide property investors looking towards the US. Historically, the US mortgage industry has been fairly rigid when it comes to providing mortgage finance for foreign nationals and non-residents. However, using our independent status we have nurtured a very interesting partnership with a specialist in US mortgage finance.

Foreign national mortgage loans

Foreign nationals and non-residents of the US are barred from applying for traditional US mortgages. As a consequence, foreign national mortgage loans were created to assist foreign nationals and non-residents looking to raise mortgage finance to acquire US property. Working with our contacts we have managed to put together a US mortgage package which is very flexible.

Qualifying for a US mortgage loan

It is fair to say that historically many U.S. based banks placed a number of hurdles in front of foreign nationals and non-residents looking to acquire US real estate. We have managed to remove many of those hurdles and the following information is all that is required to apply for foreign national mortgage funding:-

• Copy of executed purchase agreement
• Verifiable funds for the down payment (last two months bank statements)
• Funds to cover the closing costs of the purchase
• Identification documents (copy of passport)
• Credit references (credit card, mortgage, car lease, etc)
• International credit history report (not always required)

Due to our blossoming relationship with our US mortgage partner we have managed to reduce the paperwork required. In the vast majority of applications the following information will NOT be required:-

• Income verification
• US credit history
• US visa/residency
• Funding reserves
• Life insurance
• Tax returns
Private bank mortgage insurance

It is also worth noting that in the majority of cases, there will be no upper age limit and no prepayment/redemption penalties.

Structure of a foreign national mortgage loan

Due to the perceived added risk associated with lending mortgage funds to a foreign national/non-resident the headline interest rate is often greater. While there is still an element of this in the market today, we have on numerous occasions been able to negotiate the traditional 50% deposit down to as low as 30%. As well as increasing funding there is also the opportunity to secure a funding multiple of up to seven times. This will obviously depend upon the applicant’s background/financial situation but there is certainly scope to reduce the initial deposit and increase liquidity.

The subject of interest rates is also very interesting with fixed rates available for 10 years, 15 years and 30 years fully amortised. Variable rates are available for three years, five years and seven years for a 15 to 30 year term mortgage. It is no surprise to see many foreign nationals and non-residents now looking to fix mortgage rates to take account of relatively low US base rates.

Summary of foreign national mortgage terms

The exact terms of individual foreign national mortgages will vary depending on the applicant’s background. However, the following list of terms will give you an idea of the scope for negotiation:-

Deposit: Minimum 30%
Initial interest rate: 6%
Term: 15, 20 and 30 year fixed
Loan amounts: Up to US$5 million
Repayment penalties: None
Credit report: International credit history report (required in some cases)
Property: Eligible for 1 to 4 unit residential properties
Underwriting: 72 hours
Average deal closure: 30-45 days

While the reduction in paperwork required is extremely helpful, we are also very pleased with the competitive and flexible terms on offer. The relatively quick turnaround time will be especially useful for those undertaking a time critical purchase of US real estate. If you require any further information please do not hesitate to contact us.