When applying for a mortgage loan here in the United States there is a small box that needs to be checked that asks if the applicant is a U.S. citizen. Most applicants are indeed citizens of the United States but there are times when the applicant is a citizen of another country and wants to finance a place to live here in the U.S. Such applicants are referred to as “Foreign Nationals.” Getting a mortgage for a foreign national is certainly an option but loans designed for foreign nationals follow slightly different guidelines compared to someone who is a citizen here and lives and buys a property in the United States.
Typically, a foreign national buying a home as a place to live is someone who is working here for a U.S. company and here on a work visa. Loans for foreign nationals do carry a greater risk than other types of loan programs typically due to the lack of recourse should the borrower default on the loan. Should a non-citizen buy a property in the U.S. and then later leave the country and default on the mortgage, the lender has no way to recover the back payments other than selling the property. However, this is extremely rare as such loans do ask for a greater down payment.
Mortgages for foreign nationals are typically adjustable rate loans, or hybrids with 30-year terms. For example, a buyer has work here in the United States for five years and does not want to rent but instead own the place in which to live. In this instance, perhaps a 5/1 hybrid is the best choice, offering a lower initial rate compared to a fixed rate loan during the course of the first five years.
Minimum down payments for foreign national loans are at 20% but the rates and terms can be more competitive with a greater down payment. Foreign national buyers must also demonstrate a solid credit history but sometimes that can be a challenge. Today, most mortgage loans require a minimum credit score which is based upon an applicant’s credit history with merchants here in the United States. If someone has not lived in the U.S. or otherwise applied for credit with a U.S. based merchant or business, credit histories will be documented with the cooperation of creditors overseas which can provide credit histories of foreign nationals. This process will take longer compared to pulling credit scores but it will take a bit more time.
Many lenders don’t offer a loan program for foreign nationals but we do and we know how to structure them. If you or someone you know fits this profile and is interested in buying a home here, either as a primary residence during their stay or buying an investment property, then let’s talk and discuss how foreign national financing works.