Foreign National Mortgage & Home Loan Guidelines in 2024
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Summary:
It can sometimes be more difficult for a foreign national to obtain a traditional mortgage loan, often due to — among other things — not having a U.S. credit history or a SSN. The good news is that there are a variety of foreign national loans that utilize less conventional lending requirements to approve mortgage loans for foreign national buyers. In short, foreign national mortgage loans make it easier for foreign nationals to buy a home in the United States.
Purchasing real estate — whether it’s a primary residence, a second home, or an investment property — can be a fairly complicated process. This is particularly true if you’re not a U.S. citizen, you aren’t familiar with the mortgage lending process in the States, and you don’t have all of the necessary documentation that U.S.-born borrowers typically need to qualify for a mortgage loan.
Fortunately, there are a number of lenders who offer foreign national mortgages and specialize in the nuances of foreign national mortgage guidelines. As Gagan Saini, Director of Acquisitions at JiT Homebuyers, says, “Navigating the U.S. mortgage landscape as a foreign national can feel like charting unknown territory, but it’s far from impossible. Foreign national and non-residential alien loans are tailor-made but require fulfilling specific criteria.”
Read on to learn more about foreign national mortgage loans, including the requirements needed to obtain foreign national loans and the benefits and drawbacks of a foreign national loan program.
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What is a foreign national mortgage loan?
Foreign national loans are simply mortgages designed for borrowers who are not U.S.-born citizens or naturalized citizens and who want to buy property in the United States. This means that lenders who offer foreign national mortgage options are willing to work with less conventional qualifying methods than other lenders.
For example, lenders of conventional loans typically need to look at a borrower’s credit history, tax returns, proof of income, employment history, bank statements, debts, and assets. Some of these requirements might be difficult or even impossible for foreign national borrowers to come up with.
Foreign nationals may have to deal with not having a SSN, U.S. credit history, or tax records. Language barriers or unfamiliarity with the U.S. mortgage process are also an obstacle. However, there are lenders and mortgage brokers who specialize in helping foreign nationals.
In a nutshell, lenders who offer foreign national mortgages tend to use more flexible qualification methods than traditional lenders. A foreign national program makes the path to homeownership much more feasible for those not born in the States who are looking to purchase property.
Pros and cons of foreign national mortgage loans
Before you apply for a foreign national mortgage loan, you’ll want to consider the following benefits and drawbacks:
Pros of foreign national loans
- With foreign national loans, borrowers can purchase homes or investment properties in the U.S. without needing a Social Security number, green card, or visa.
- Some foreign national lenders offer loan amounts of up to $5 million.
- Foreign national borrowers don’t necessarily need a U.S.-based credit history.
- Foreign national loan lenders offer a variety of mortgage loan types to choose from.
Cons of foreign national loans
- Foreign national mortgage loans usually require a larger down payment.
- Interest rates are also typically higher for foreign national mortgages.
- To be approved for a foreign national loan, a borrower may need to have significant cash reserves on hand.
- Foreign national borrowers may be required to keep their money in an FDIC bank for a specified period of time.
- Currency exchange rates may cause issues with monthly mortgage payments.
Pro Tip
Don’t forget about the impact of exchange rates on the borrowing process. If a foreign national’s income is in a different currency, fluctuating exchange rates can complicate the repayment of a U.S. dollar-denominated loan.
How to apply for a foreign national mortgage loan
For foreign nationals looking to get a mortgage in the United States, it can help to understand the entirety of the buying process from the start to the closing date. You should also learn what to expect and what kinds of documentation you’ll need to provide, including what to do if you don’t have a credit report.
Get pre-approved for a mortgage loan
Before you even start house hunting, it’s highly recommended to get pre-qualified for a mortgage loan first — and it may even be required by your real estate agent. Not only does it demonstrate a commitment to buy, but it can also help you determine your budget, which is of the utmost importance, says Adie Kriegstein, Licensed Real Estate Salesperson at Compass Real Estate.
“Getting pre-approved can help buyers determine their budget and what they can realistically afford. Many buyers often have a number in their head they want to spend or think they can, and often that figure ends up being wrong when one examines all the costs that go into a purchase. By getting pre-approved, buyers will know exactly how much they can borrow from a lender, which can help them narrow down their search to homes that are within their price range.”
Ultimately, your budget isn’t necessarily about the sales price you think you can afford; it’s more about the monthly mortgage payments that will fit into your budget. As a foreign national, it’s important to understand that each monthly mortgage payment typically consists of the mortgage principal plus interest, taxes, and insurance.
As Kriegstein explains, “Overall, getting pre-approved for a mortgage before starting a home search is a smart move. It can help buyers determine their budget, move quickly when they find a home they like, and demonstrate their commitment to the home-buying process. For agents, it can help them work more efficiently and ensure that they are working with serious buyers who are ready to make a purchase.”
Pro Tip
“Often a mortgage broker will be the best resource for finding and funding great mortgage solutions for a foreign national homebuyer because they have access to many different lending platforms and types. There are lenders and investors specifically creating solutions and making it easier for a foreign national to successfully purchase American real estate.” — Scott Griffin, Mortgage Broker at The Scott Griffin Team
Find a real estate agent
A real estate agent is an invaluable resource in the home-buying process. Not only can they help you find homes you’re interested in that are in your price range, but they can also help you navigate the whole process from start to finish. Be sure to find an agent who has experience dealing with international transactions and who understands currency issues, visas, financing, and various tax laws that may apply to foreign national buyers.
Gather your documentation
Requirements will vary depending on the foreign national program you choose, the exact loan type you apply for, and your residency status, among other variables. In general, you should plan to have the following documentation prepared:
- Proof of identity (typically a passport)
- Green card or eligible visa, if applicable
- Proof of income
- Documentation of assets
- Documentation of debts
- Bank statements
- Two-year history of employment, with contact information
- Two-year history of residency, including dates and addresses
Keep in mind that some lenders may require you to have money in a U.S. FDIC-insured bank for a period of time, says Griffin. “Many lenders require a deposit relationship of at least 30 days in an FDIC-insured American bank (not a credit union) to lend.”
Plan to have enough money in a U.S. financial institution to cover your down payment, closing costs, and any cash reserves that may be required for your loan type.
Prove your creditworthiness
While many loan types available to foreign nationals may require you to have a U.S. credit report, there are lenders who are eager to work within a borrower’s specific financial circumstances. This means they may be willing to accept foreign credit reports from your home country or an international credit report.
For lenders who don’t accept foreign credit reports, you may need to demonstrate creditworthiness another way, such as by building up your credit history in the United States. Some foreign national mortgage lenders may also approve your loan if you have three active and open trade lines with a minimum of two years of use.
Pro Tip
“While U.S. credit history is vital, some lenders might consider foreign credit profiles. Roadblocks may include higher down payments or interest rates. Seek out specialized lenders; remember, knowledge is your strongest ally in this journey.” — Gagan Saini, Director of Acquisitions at JiT Homebuyers
Find a house and make an offer
Whether you’re looking for a vacation home, investment property, or permanent residence, house hunting is the fun part! Some foreign national mortgage loan lenders have maximum loan amounts of up to $5 million, but many also have a minimum loan amount to qualify, which you’ll want to be aware of before you apply.
Once you’ve found what you’re looking for, you can make an offer that will hopefully be accepted by the seller. Sometimes you may have to negotiate a little before you can both agree on a sales price.
Fill out a loan application
Once you’ve found the home you want to buy and have agreed on a purchase price with the seller, it’s time to fill out your foreign national loan application. If you’ve supplied some of this information during pre-approval, then you’ve already gotten a head start!
After you’ve filled out the loan application, you should receive a loan estimate from the foreign national mortgage lender within three days. This will outline the details of your loan, including the estimated interest rate, monthly payment, and closing costs. It should also give you information about the estimated costs of insurance and taxes.
Make sure you read this estimate over very carefully — in fact, it’s highly recommended to have your real estate attorney look it over as well. Among other points, you’ll want to see if there are prepayment penalties or other hidden fees that may increase the cost of the mortgage loan. Keep in mind the loan estimate is not an indication of loan approval; it simply gives you an idea of what to expect if you decide to move forward with the foreign national loan approval process.
Lock in your mortgage rate
If you decide to accept the estimate, this is when you’ll lock in a mortgage rate. Keep in mind that this will likely be higher for foreign nationals than residents with permanent status. Interest rates fluctuate daily, so locking in a rate means you’ll have a guaranteed interest rate prior to closing.
IMPORTANT: It should be noted that some foreign national loans may come with fixed-rate loan terms or as adjustable-rate mortgages. It’s important to be aware that if you choose an adjustable-rate mortgage (ARM), your monthly payment will vary as interest rates change.
Loan processing
This is when the underwriting process begins, when a real estate professional (the underwriter) goes through all of your documentation to determine if your application meets the guidelines needed to obtain the loan. Again, depending on the lender, you may need to supply additional documentation based on the type of loan you’re securing. The quicker you do this, the faster and more smoothly the underwriting process will proceed.
Decide on a down payment
Lenders who deal in foreign national mortgage loans typically require a larger down payment than your average home loan. Expect to put down at least 20% of the sales price, though it could be significantly more, says Griffin, adding that you may also need to provide evidence of cash reserves.
“Down payment requirements range from 30% to 50%, depending on lenders and home purchase price, and often [require] showing reserves equaling 12 months of mortgage payments and the ability to retain those reserves in their accounts after the close.”
Close on the house!
Once your application for a foreign national loan has been approved for financing, you’ll set a closing date to meet with your real estate agent, the seller, attorneys, and the lender to sign all the paperwork and finalize the deal. A few days before the closing, you will receive a closing disclosure that provides the final details of your foreign national mortgage and how much money you’ll need to provide at the time of closing.
Once that’s all done, you’ll get the keys to your new home or investment property. Congratulations, you’re now officially a homeowner in the United States of America!
Key Takeaways
- Non-citizens without a United States credit history and a Social Security number will need to take out a foreign national mortgage loan to purchase homes or investment properties in the country.
- Credit requirements vary depending on the foreign national loan lender, but some may accept credit reports from your home country or an international credit report in place of a FICO score.
- Foreign national loans typically come with restrictions on loan amounts, including a minimum loan amount that a borrower must apply for.
- A foreign national mortgage loan is often considered riskier for lenders, which is why it will usually come with a higher down payment and interest rate than would typically be required for a conventional home loan.
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