Financing for International Buyers in the USA

Depending on an international buyer's visa classification, lenders may have more stringent underwriting guidelines.  Mortgage lenders are more cautious about financing second homes and investment properties for foreign nationals for a very practical reason.  If a non U.S. citizen were to leave the country and default on a mortgage loan, the lender would have little or no remedy.  To hedge their risk, lenders often require that international buyers make  larger down payments and submit to more stringent requirements in order to meet their underwriting guidelines.

With these additional requirements from lenders, international buyers need to be patient with the financing process.  It's not unreasonable to expect that it may take considerably longer than it would for U.S. residents to get a loan and expect lots of paperwork. 

Most of this comes from US laws aimed at preventing money laundering, etc.  One of the challenges many non-permanent residents (those foreigners in the US with working visas) face is a lack of an established credit history in the U.S.  Even when lenders allow for alternative credit documentation, "non-perms" sometimes may have to settle for less than favorable financing terms, but they can refinance later for better rates and terms once they establish a positive credit history in the States.

Tourist visas for foreign nationals do not allow them to work or reside in the U.S.  This Category includes Canadians, Europeans (or any other non U.S. resident) who

want to buy second homes for investment or vacation purposes.  Before the home financing crisis, international buyers had more mortgage options available. 

Some lenders still offer loan programs for foreign nationals, but they carry stringent documentation requirements.  Without a credit history to consider, mortgage lenders focus on documented income and other assets.  To underwrite a loan for foreign nationals, lenders typically require a substantial down payment of 35% or more, in addition to closing costs.  Foreign nationals can expect to pay higher interest rates and possibly upfront charges for these loans.  Requirements will vary from lender to lender, but here are some tips offered to international buyers to help them prepare for financing a property in the U.S.  Following these steps can help foreign nationals secure a mortgage.

Financing Tips for International Buyers:

1.  Establish credit in the U.S., if possible.

2.  Open up an account with a U.S. based bank at least 3 months before you seek financing

3.  Start an account in your home country with a large international bank with branches in the U.S. close to where you want to purchase a home.  Many larger US banks like Bank of America (the US's largest mortgage provider) has offices in the UK and other locations.

4.  Get a few reference letters declaring you are in good standing from 3 financial institutions in your home country if you can't accomplish #1 or 3.

5.  Obtain verification of your gainful employment and line of work.  A simple letter from an accredited accountant or some other third party in your resident country will suffice.

6.  Apply to extend your visa or passport if it's due to expire in 6 months or less.


Are you looking for US investment property at a discount? Are you looking for a discounted short sale or bank owned property?  John Breaux can be reached at john@marathon-group.cz or +420 602 355 810 or +1 504-208-4331.

 

Information contained herein is for informational purposes only.  Please check with your tax accountant and/or legal adviser before making any investment decision.

Buying Property in Florida - What's Next?

When you submit your offer, you'll be required to pay a deposit.  This money is held in an escrow account (an account held by a neutral third party - in order words, not held by either the buyer or the seller).   The deposit is generally held by the agent or the closing attorney.  This is used towards the sale price and is not an extra charge.

Note: Escrow is a term which might confuse some European buyers mainly because it's not one that's typically used in the UK, for example, while it's common in the Czech Republic.  You can read more on this here: Escrow from Wikipedia.

One important thing to mention here is that if you're a foreign national looking to buy in the USA, you really should establish a bank account there.  Most sellers, especially institutional sellers like banks, won't consider an offer if you can't prove you have the funds readily available.  Saying you have the funds in a European bank account won't mean much if it takes a week to get the funds transferred.  Generally speaking your local agent will ask for this (a recent bank statement, for example) to be submitted along with your offer. 

If you're making an all cash offer, once your offer is accepted you will have as many days as specified in your offer to make inspections, get condo association approvals, etc.

Once that's all done and you're satisfied with the information you've received you can proceed to closing.  You will be provided with a good faith estimate in line with The Real Estate Settlement Procedures Act (RESPA) outlining who pays for what at closing.  

NOTE: RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD (the US Department of Housing and Urban Development).

There are usually two columns on the good faith estimate - buyer's side and seller's side.  You'll see all the costs delineated on the form with totals on the bottom.   Besides the purchase price, you will be responsible for prorated property taxes, for example, utilities and home owner dues, if applicable and/or if any are outstanding.    Your local agent will go through this with you and make any corrections and notify the closing attorney.

The closing will be scheduled and either you or your representative (empowered by a power of attorney) will be present along with the seller and your respective agents will be there.  You'll need to have certified funds with you.  Your local US bank can provide you with a certified check.  You sign it over to the closing attorney, sign the closing documents and receive the keys to your new home or condo.  Possession is immediate in the US.


Are you looking for US investment property at a discount? Are you looking for a discounted short sale or bank owned property?  John Breaux can be reached at john@marathon-group.cz or +420 602 355 810 or +1 504-208-4331.