Non- QM Loans: Foreign National Loan Programs
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In the United States, there are some incredible opportunities for real estate investors. But what if foreign nationals want to invest in the American real estate market? Most qualifying mortgages are targeted towards American citizens: people with American credit scores, assets, and income. For foreign nationals, there are Foreign National Loan Programs.
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What Is a Foreign National Loan Program?
A Foreign National Loan is likely to have a higher interest rate than more conventional mortgage loans, as it’s considered to be higher risk. The percentages are usually about 2% more APY than a conventional residential mortgage, but that doesn’t necessarily mean that it’s impossible to get a lower loan. Those who are excellent candidates may be able to negotiate a more favorable rate.
How Do You Qualify for a Foreign National Loan?
Not all banks provide Foreign National Loans; they’re fairly rare on the market. But there are enough lenders that provide Foreign National Loans that you should be able to shop around. Many of the largest banks will have Foreign National Loans, as well as niche lenders that specialize in these types of loans.
To qualify for this type of loan, you need to meet some requirements.
- For most Foreign National Loans, you will need at least a 25% down payment. Conventional loans are usually 20%, with some loan programs (such as FHA mortgages) being as low as 3%. The more you put down, the lower-risk the loan is, and the greater your chances are of acquiring the loan.
- Your purchase has to be an investment. Foreign National Loans aren’t for owner-occupants, so if you’re a foreign national hoping to live in the United States, you’ll need a different type of loan. You’ll need to be able to show your intent for remaining in another country and making income in that other country, rather than coming over to the US.
- You will likely need to provide bank statements and documentation from your employer. Because you don’t have United States tax returns, there’s no standardized way to underwrite your loan. Instead, the lender that is providing the loan will ask you for the documents that they deem necessary. Usually, this is going to be direct proof of regular income and current assets.
- Credit score can be an issue, due to the inability to establish a foreign national’s credit risk. This will depend primarily on the lender; some of them will simply use an asset-backed manual underwriting process, while others may require that you have at least a thin file with the United States in terms of lending criteria. You may need to shop around.
A Foreign National Loan is one of the few ways that a foreign national can easily borrow money to purchase an investment property in the United States.
Other than requiring a substantial down payment, a Foreign National Loan is very like any other conventional mortgage.
What If You Want an Owner Occupant Property?
Since Foreign National Loans are only for investors, those who are residents in the United States will need a different option. Foreign nationals who are residents in the United States can apply for a traditional mortgage instead of a Foreign National Loan. Resident foreigners will be able to present their income, tax returns, and credit scores just as American citizens would, and consequently will be able to purchase a home under a conventional loan.
To get a loan for an owner occupant property you need to have a green card and a social security number; this will make you eligible for QM loans such as FNMA and FHA home loans. You can go through a conventional lender for these loans. But if you want to make an investment in the United States real estate market and you don’t live in the United States, then you’ll need a Foreign National Loan.
It is legal for anyone to purchase property in the United States, whether it’s an investment property or an owner occupant property. Citizenship and residency only control the types of loans that you can acquire, primarily due to risk factors during the underwriting process. An undocumented person can purchase a house in the United States for this reason, but they likely cannot acquire a mortgage loan to do so.
If you’re a foreign national, want to purchase property in America, and have a sizable down payment, a Foreign National Loan can help. While it’s only open to investment properties, it’s an excellent financial tool for those who don’t want to purchase an investment property outright.