A recent Wall Street Journal report said that international homebuyers can secure a mortgage loan to buy homes in the U.S. This goes against the common notion that foreign buyers can only buy U.S. residential properties in cash. The present low rates (remember when foreign investors flocked to the safety of U.S. government bonds during the Brexit era) have presented a greater opportunity to invest homes in the U.S. through mortgages. »Get to know mortgage lenders that can help you!»
Cash-based Home Purchases
In general, nonresident foreigners are not allowed for conventional mortgage loans backed by the U.S. government or even those mortgages that exceed conforming loan limits (jumbo loans). Since these overseas buyers themselves don’t think they could get mortgage financing, they’d turn to cash. Paying in cash somehow limits how much these buyers can afford.
According to the WSJ which used data from the National Association of Realtors, about half of overseas buyers that bought residential real estate in the U.S. paid in cash last year.
From some lenders’ point of view, it would be difficult to run after delinquent borrowers if they are based outside the U.S.
Private Mortgage Lending
But there are private lenders willing to provide loans to non-U.S. borrowers, per the report. For one, Total Mortgage Services provides its foreign borrowers with loans from $200,000 to $2,000,000. Down payments on loans for up to $1 million can be 30% and higher, with more to be expected for second homes. Rates are from 5% on 5-year adjustable-rate mortgages (ARMs) to 6.625% on 30-year fixed-rate mortgages (FRMs). Overseas mortgage applicants go through the normal process of loan qualification, including credit, assets, and income verification.
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Another private lender in California, Insignia Mortgage reported having made $80 million in home purchase and refinance loans to foreign borrowers within the last 12 months. The California-based lender offers loans varying from $500,000 up to $7,000,000 with adjustable rates in three, five, or seven-year terms. These ARMs have rates ranging 2% to 3% during their initial fixed-rate periods.
Transactions can even run smoother if banks have operations in the U.S. and their home countries. Examples are HSBC, which is based in London but has offices in 71 countries; East West Bank with its offices in California and China; and TD Bank, a subsidiary of Toronto-based TD Bank Group, which assists Canadian borrowers in buying second homes in the U.S.
Mortgages for Foreign Borrowers
Mortgage qualification process in the U.S. is totally different from what foreign homebuyers undergo in their home countries. Assuming you are a foreign borrower, keep in mind these tips from the experts to ensure a smooth and streamlined transaction.
Working with Professionals
Find time to look for professionals that can help you navigate through the process of homebuying in the U.S. Start with real estate agents who should have experience in dealing with overseas homebuyers for U.S. real estate transactions. They can refer you to a lawyer, accountant and other professionals to help you along the way.
Foreigners don’t have U.S.-generated documents like credit history and tax returns. As an alternative, you will be asked to produce bank statements and tax returns originated from your home country. You might also need a letter from your accountant regarding your income and assets and at least six months’ worth of credit card statements.
Also, brace yourself for a longer mortgage processing. A U.S. mortgage loan could take 30 days or so. In light with this, prepare your documents beforehand, submit them, and get pre-qualified for a loan.
Finding the right lender is key to getting a good mortgage deal. Always talk to a number of lenders to compare rates and offers. Do remember that rates and down payments for “overseas buyers” loans tend to be higher. Shopping for lenders is made easy through the orange button. »Click here and find out if you can qualify for a U.S. mortgage.»
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.