If you’re entering the U.S. real estate market from another country, buying a home can seem even more daunting than it does to local Americans.
Many foreign borrowers looking for a home or investment property here in the United States can find it difficult to navigate the mortgage process.
Sometimes they lack the usual documents needed for loan underwriting, such as government-issued IDs, bank statements, or tax returns. Sometimes it is just difficult to be sure how to make sure you are positioning yourself to make the strongest application possible.
However, with the right ally and some planning, buying a home in the United States can be a success for all involved.
Here’s how.
Know what type of borrower you are
If you’re a citizen of another country trying to buy property in the United States, you’re either a foreign national borrower or an ITIN borrower.
This doesn’t mean that you cannot secure a mortgage. In fact, there are multiple options available to foreign national buyers, and though ITIN borrowers will face somewhat stricter requirements, the dream of owning property is attainable for anyone.
By definition, a foreign national borrower is a non-resident looking to buy real estate in the United States.
Foreign national borrowers can take out a mortgage with full or limited document underwriting, and even borrowers without social security cards or U.S. tax returns can become homeowners.
ITIN borrowers are potential buyers who aren’t eligible for social security numbers and thus have an individual tax identification number (ITIN). ITIN borrowers have access to full document loans for non-permanent residents, but need to have U.S. tax returns.
Even if you come from a tumultuous country, you can share in the American dream of home ownership, as long as you do your research and enlist the help of the right broker for your mortgage.
What are your options?
Typically, a domestic or local American applicant will have a credit (or FICO) score, employment record and tax documentation.
However, even borrowers who have no FICO credit score, no income or employment records, and no reserves can get a mortgage up to $4 million for a second home or investment property.
That means even with next to no traditional loan documents, you could buy a home or property as long as you meet certain criteria.
For example, the loan-to-value ratio must be 75% or less, meaning that the mortgage cannot be for more than 75% of the appraised value of the property.
Additionally, the assets must be seasoned for at least sixty days, meaning there must be at least a two-month paper trail—the assets can’t appear out of thin air.
This kind of loan is available for:
- townhomes
- condominiums
- non-warrantable condominiums (including condominium hotels)
- single-family residences
- two-to-four unit properties
- various types of commercial properties
There are many additional options available to you if you’re a foreign national buyer looking at this type of loan.
You may be able to gain a seller concession of up to 2%, meaning the seller may be willing to pay up to 2% of the closing costs.
Gift funds are allowed, and cash-out refinancing is available, up to 70% of the loan-to-value ratio. There is even an interest-only option, which helps you reduce your monthly payments.
For foreign national borrowers who have similar documentation issues but who qualify on a rental survey, similar options are available. This is available for borrowers with certain visa types.
Another option for foreign national borrowers is the jumbo loan.
Almost identical to the options above, borrowers must produce a debt-to-income ratio of at most 50% with compensating factors, and full documentation of income, including 24 months of bank statements.
(Read more in my Miami jumbo loans guide here).
Options for ITIN borrowers
If you’re a borrower with an individual tax identification number, there is a program for you.
ITIN borrowers can take out mortgages of up to $2.5 million and up to 90% loan-to-value ratio.
While you don’t need a FICO score, you must have a debt-to-income ratio of up to 50% with compensating factors, full income documentation including 24 months of bank statements, and assets that have been seasoned for at least 60 days.
As an ITIN borrower, you can mortgage a primary residence or second home, but not a commercial property. This home can be a townhome, condominium, a two-to-four unit, or a single-family residence.
Cash-out refinancing is available, gift funds are allowed, and you could access an interest only option. Additionally, you could get a seller concession of up to 6% towards closing costs.
Conclusion
The U.S. real estate market is complex, but owning property can become a reality no matter your circumstances.
Even if you lack traditional documentation, working with an experienced broker can help you make your dream a reality. As an experienced broker and expert mortgage consultant, I work frequently with foreign nationals and ITIN borrowers to help them navigate the mortgage process.
I am able to do full document underwriting and limited document underwriting, such as rental income and 24 month bank statements. No document loans are also possible, for borrowers applying with no Social Security card or US tax returns.
