Owning a home in the United States is a dream of many, a milestone that marks the start of one’s American Dream. Be it for a primary residence, second home, or investment, the opportunities that await are just endless.
Unsurprisingly, U.S.’s beautiful landscape, advanced economy, technology, and social benefits attract thousands, if not millions, of foreigners every year. Some stay temporarily for work, business, or vacation, while others opt to settle there for good.
But regardless of their purpose, having a residential property in the U.S. is a goal for thousands of non-U.S. citizens.
One of the most common questions we’re asked by borrowers and their realtors is, “Can a non US citizen get a mortgage loan?” The answer is Yes!
Unfortunately, many non-U.S. citizens do not know their residential mortgage options. They think that home loans only cater to U.S. citizens, and they can only acquire their house through cash payment. As a result, many are discouraged and anxious to pursue their dream home. Others pay fully in cash, while some shy away from refinancing in times of need.
But things do not have to be that way.
Your citizenship should not be a hurdle in achieving your goal of being a homeowner in the U.S. Though you may face limitations and restrictions for traditional loans, there are still plenty of unconventional mortgage lenders for all types of borrowers, including foreign nationals and other non-U.S. citizens.
These loan programs are not available in most U.S. banks, so you have to look elsewhere and consider the alternatives. Creative loan programs come with flexible requirements and terms, ensuring that most non-U.S. citizen clients are given a chance to own their homes in the U.S.
This comprehensive guide will introduce you to us mortgages for non residents, the loan terms and requirements, and how you may qualify for one.
First things first, who are considered non-U.S. citizens?
In the U.S., “noncitizens” include individuals who were not born in the U.S. and its territories, whose parents were not U.S. citizens or nationals, or have not undergone naturalization. It is an encompassing term that can be further broken down into three subcategories: foreign nationals, permanent residents, and temporary residents.
Foreign nationals or non-resident aliens (NRA) hold citizenships in any other country and have their primary residences outside U.S. borders. They do not enjoy the benefits offered to U.S. citizens, including most of the conventional mortgage loans. To qualify, they require niche and out-of-the-box home loan solutions offered by alternative lenders, such as a non permanent resident alien mortgage.
Permanent residents or green card holders are individuals authorized to live and work in the U.S. Green card holders share most rights and responsibilities with U.S. citizens, like getting a license, availing social benefits, and owning real estate properties. They qualify for loans that are given to U.S. citizens with the best terms and interest rates.
Temporary residents or nonimmigrants are foreign nationals granted visas to stay temporarily in the U.S. for specific purposes. These pre-defined purposes, also called classes of admission, require different types of visas, which dictate the resident’s duration of stay and lawful activities. Temporary residents may qualify for U.S. residential loans, but they may face more requirements and limitations depending on what visa they hold.
As a non-U.S. citizen, diving into the U.S. real estate market to obtain a non US citizen mortgage loan may seem particularly daunting. Your approval is uncertain, and you do not even know if you are eligible in the first place.
However, foreign investment in US real estate remains strong. According to the National Association of Realtors’ 2023 report, the dollar volume of foreign buyer residential purchases from April 2022 to March 2023 was $53.3 billion.
Read more in our ultimate guide, Can Foreigners Buy Property in the USA?
Thanks to its landscape, beautiful coastlines, economic outlook, and tax-friendly laws, Florida remains the top destination of foreign real estate buyers.
The statistics shed hope on the increasing popularity of home mortgage loans among non-U.S. citizens:
These reassuring trends call for creative loan solutions that will cater to borrowers originating from other countries, which alternative lenders are quick to address.
The mortgage market adapts to the needs of its borrowers.
With growing risk appetites, lenders have developed a wide variety of programs designed for non-U.S. citizens. They offer lower interest rates, lower down payments, and more favorable terms, despite the COVID-19 pandemic.
Thanks to these programs, obtaining a home mortgage for non-U.S. citizens has never been as easy since the 2008 Great Recession.
There are plenty of reasons why a foreign national would want a residential property in the U.S. They may want it to be their second home, a vacation property, or rent it out to generate additional income.
Unfortunately, being a foreign-national buyer comes with some limitations:
Given these limitations, foreign nationals need untraditional loans specifically designed to address their biggest limitations.
Creative loan programs offer exactly that.
They come with alternative documentary requirements which foreign nationals can easily meet, regardless of their primary residence. Documentation and loan terms for home loans for non us citizens are flexible, with uncapped loan amounts to purchase or refinance real estate properties.
While the loan programs may vary from lender to lender, here is everything you need to know about the residential loan options for foreign nationals:
The loan amounts and limits for non us resident mortgage loans depend on the value of the property and the ability of the borrower to repay the loan. Technically, the sky is the limit as long as you can prove your creditworthiness to the lenders. Regular loans usually fall within $300,000 to $4M, but for properties worth more than that, super jumbo loans take over. With a super jumbo loan, a foreign national may borrow as much as $25M or even more, depending on the borrower’s case.
To learn more, check out our complete guide on jumbo and super jumbo loans in Florida.
Foreign nationals can enjoy flexible loan terms depending on their needs and financial situation. There are short-term loans for those who can and prefer to settle their mortgage as soon as their financial situation permits. There are also long-term loans that work for borrowers who require lower monthly mortgage payments. The loan period may last for 40 years or can be as quick as 12 months too. Borrowers may choose among the following terms and interest rates:
To learn more, check out our complete guide on jumbo and super jumbo loans in Florida.
Foreign nationals may opt to take home loans with a fixed interest rate throughout the repayment period. This option offers certainty to borrowers, preventing an unexpected rise in the borrower’s monthly mortgage payment. Under fixed rate, foreign nationals may choose between 15-, 30-, or 40-year fixed loans. The longer the term, the higher the interest rates are.
ARM is a type of mortgage where a fixed rate applies in the first phase of the loan and adjusts periodically thereafter until the repayment period is completed. Borrowers may benefit from an ARM if the prevailing interest rate in the market drops during the second phase of the loan. However, it also comes with uncertainties because the monthly mortgage payment can also go up depending on the market conditions.
Foreign nationals may choose between 3/1, 5/1, 7/1, or 10/1 ARMs. The first and second numbers pertain to the first and second phases of the loan, respectively. For example, for a 3/1 ARM, a foreign national would pay a fixed interest rate for the first three years of the loan. Afterward, the rate resets after every year, depending on the current market rates.
A foreign national may also opt for an interest-only mortgage. In this type of loan, the borrower’s monthly mortgage payments only include the loan’s interest. All the remainder are paid at the maturity date, also called a balloon payment. This setup works best for foreign nationals who expect to receive a considerable sum of money before maturity. However, it also carries uncertainties because of the large amount needed in case any problem happens.
Short-term bridge loans typically last from 12 to 24 months, depending on the borrower’s preference. This type of loan typically comes with interest-only payments because of its short repayment period. It has higher interest rates but typically allows prepayment without penalties, giving borrowers the chance to refinance the loan with better terms if needed. It offers quick closing too.
To get the best deal for your situation, you should weigh these options based on your cash flow.
Creative home loans aim to address all financing worries related to buying or keeping a residential property in the U.S. As a foreign national, you may apply for a purchase loan or refinance your residential property if you already have one.
Following are the three general types of foreign national loans for non residents:
A purchase loan is used to finance a residential property that the borrower does not own yet. It is the simplest type of loan where the loan proceeds go to the property seller in exchange for the title being transferred to the borrower. The loan amount starts at $300,000 and can go as high as what your income and creditworthiness can support.
Aside from purchase loans, foreign nationals may also apply for refinancing.
Refinancing is a lesser-known type of home loan that can save many borrowers from high interest rates, unmanageable monthly payments, and provide liquidity in times of urgent need for cash.
A foreign national who has an existing mortgage may apply for cash-out refinancing.
Cash-out refinances can also be used for delayed financing.
In rate-and-term refinancing, borrowers trade an existing mortgage for a new one with better terms. For example, they may refinance a short-term bridge loan to a 30-year fixed mortgage before the balloon payment comes. This way, they will not need to pay a lump sum at once but have the payment amortized over 30 years instead.
Rate-and-term refinancing also offers an advantage during the pandemic. Foreign nationals who have an existing adjustable- or variable-rate mortgage may refinance their loans to a fixed rate. This way, they will be saved from any rise in the prevailing interest rates as the U.S. real estate market recovers from COVID.
The loan-to-value ratio (LTV) shows how much risk a lender is willing to accept for your mortgage loan. Depending on the transaction type, LTV is calculated in two ways and may carry different implications too.
For purchase loans, the borrower’s down payment depends on the LTV approved by the lender. By dividing the offered loan amount by the lower of the appraised value or the contract price, borrowers can calculate their LTVs, and know how much cash they need to prepare as a down payment.
For example, if the residential property is worth $1M and the lender offered an 80% LTV, the loan will cover $800,000 of the total price while the borrower pays for the remaining 20%, equivalent to $200,000. A lower down payment typically comes with a higher interest rate, so balancing and considering your options, needs, and financial situation is important.
Alternative lenders typically offer a maximum LTV of 75% to 80% for purchase loans. Because the given limits are the maximum LTVs, you may need to prepare more cash depending on your circumstances and creditworthiness.
LTVs also apply to rate-and-term and cash-out refinancing. For these types of loans, LTV refers to how much of the home’s equity is loaned by the lender. It is computed by dividing the loan amount by the property’s appraised value.
For example, if a house worth $1M received a refinance loan offer of $700,000, that means the borrower qualified for a 70% LTV. The $700,000 will be given as cash-out, while the remaining 30% part of the equity remains owned by the borrower.
Foreign nationals may enjoy LTVs of at most 65% to 70%. The lower the LTVs, the better rates and terms the borrower will receive.
When it comes to mortgage loans for non U.S. citizens, you are not limited to single-family homes. There are residential loan programs available to foreign nationals to purchase or refinance all imaginable property types. Here is a comprehensive list:
The occupancy type of foreign nationals must align with their residency status. Because their primary residence is outside the U.S., they can only use the above-mentioned properties as an investment or a second (vacation) home.
Most lenders require the property to be located in a vacation or resort area for this occupancy type. If your property of interest is located in a metropolitan area, there is a high likelihood that the lender would consider it as an investment property instead of a vacation home.
Also known as non-owner-occupied property, a foreign-national borrower cannot stay permanently or temporarily in the purchased or refinanced property. Instead, it must be rented out to third parties to generate income as a form of investment. Note that investment properties typically come with slightly higher interest rates and lower LTVs.
The U.S. real estate market attracts foreign real estate investors from around the globe, and lenders have designed investor non resident alien mortgage loans.
The DSCR program is perfect for foreign national investors who have high DTI and cannot or opt not to submit proof of income or employment verification. Under this program, creative lenders do not compute the borrower’s DTI and instead focus on the property’s income potential. By dividing this income potential by the property’s expenses, the debt service coverage ratio can be computed, hence its name.
Depending on the obtained DSCR, the loan amount may go as high as $7.5M, with an LTV of at most 80%. If you are a real estate investor who plans to purchase or refinance multiple rental properties, the rental portfolio program may suit you better.
Foreign nationals have access to fix-and-flip bridge loans to finance their purchase or rehabilitation of 1- to 4-unit properties. They can use this loan to buy a fixer-upper, renovate the property, and sell it at a higher cost to generate income. The typical loan period is 1 to 2 years, so borrowers should see that the project is completed on time to avoid financial problems. First-time investors are eligible for this type of loan because lenders do not require foreign nationals to have prior fix-and-flip experience.
This loan program is designed for seasoned real estate investors who want to purchase or refinance multiple residential properties under one blanket loan. Some lenders allow foreign nationals to participate in their rental portfolio program, with flexible requirements and loan amounts from $1M to as high as $50M.
Foreign nationals can enjoy flexible requirements depending on the loan program and their circumstances. Generally, there are three paths a borrower can take: full, alternative, or no documentation.
This path is perfect for what we call horse borrowers, or those with good credit history, low debt-to-income ratio (DTI), and in compliance with all the requirements needed. Under this route, borrowers report their documented income and allow the lenders to compute their DTI. To qualify for full documentation, the borrowers must provide:
Full documentation carries less risk for the lenders; thus, foreign nationals who take this path typically enjoy the best rates and terms.
Not all borrowers can be horses.
We also have zebra borrowers who, for one reason or another, cannot comply with all the requirements needed for the full documentation.
Zebra borrowers can be self-employed individuals who do not have paystubs and a steady flow of income in their tax returns. They can be unemployed or retired individuals but with a high net worth or considerable amount of assets.
No matter what reason makes a foreign national a zebra, alternative documentation can help them overcome the challenges.
Under alternative documentation, foreign borrowers are not required to submit their foreign tax returns. Instead, lenders ask for alternative documents to verify the borrower’s ability to repay the loan.
The alternative documents needed for each loan program may vary depending on a case-by-case basis.
Below are some sample scenarios under the alternative documentation route:
Other foreign borrowers prefer not to disclose any information regarding their income. They also cannot take the alternative documentation route because they do not want to report their assets or submit an accountant letter, for example.
To respect this preference, lenders designed other home loan programs that require no income documentation at all.
Instead, the lender focuses on the value of the property to be purchased or refinanced, hence why these loans are referred to as collateral-based or hard money loans.
This is the easiest and quickest route; however, this ease comes with a tradeoff. To make up for the higher risks, lenders impose higher interest rates.
Watch the video below to see how we helped a foreign national from Spain close in only 4 days with a hard money loan.
Safety always comes first when applying for a mortgage as a non us citizen. To avoid the risk of acquiring COVID, foreign nationals now enjoy the benefits of digital, remote closings. All the loan processes are completed remotely, eliminating the need to travel to the U.S. in most circumstances.
Mortgage brokers also help in setting up a limited liability company (LLC) or other U.S. business entities. These entities, an LLC, for example, can act as the borrowing entity and hold the property title on behalf of the foreign national. This option is perfect for buyers who want to keep their privacy, have limited liability, and enjoy tax advantages.
Finally, mortgage brokers can also assist with opening a U.S. bank account. Lenders require foreign-national borrowers to have a U.S. bank account where their monthly mortgage payments will come from. This process can also be done entirely online, so you won’t need to think about the travel restrictions and safety concerns.
Unfortunately, some lenders do not offer a non resident mortgage in the USA to foreign nationals residing or earning income from countries perceived as economically and politically risky.
Most lenders will not lend to citizens from countries included in the FATF High-Risk and Non-Cooperative Jurisdictions List and those subject to the OFAC active sanctioned program.
As of October 2021, these countries include:
Be sure to visit the FATF and OFAC websites for the most updated list.
Despite Venezuela being on the OFAC list, we found our client a lender with flexible guidelines.
Compared to foreign nationals and temporary residents, permanent residents have the highest odds of obtaining a U.S. home mortgage loan.
They enjoy the same residential loans offered to U.S. citizens, with the same requirements and terms. They are qualified to apply for conventional loans backed by Fannie Mae or Freddie Mac, which come with better rates and terms.
Learn how we helped a green card holder from Argentina obtain a permanent resident home loan for a $2.63 million new construction condo.
Temporary residents are also eligible for the same loan programs as green card holders.
To get the best terms and rates, they may apply for conventional loans but are subject to slightly more restrictions. For example, temporary residents may need to provide a valid Employment Authorization Document (EAD) and/or an unexpired visa to process their loans. For visas set to expire within three months, proof of continuance may also be required.
For permanent and temporary residents who have issues like high DTI, low credit score, and no proof of income or employment will have a hard time qualifying for conventional loans. In cases like this, creative home loans prove to be more beneficial.
Your citizenship and residency status should not get in the way of you owning your dream home in the U.S. Regardless of what limitations you are facing, there are plenty of alternative mortgage specialists willing to embrace your situation and lend money for your purchase or refinancing, be it for a primary residence, vacation home, or real estate investment.
As a non-U.S. citizen, you can enjoy flexible terms and requirements. You can enjoy custom-tailored home loans based on your specific case and needs. With creative residential loans, nothing should stop you from being a U.S. homeowner. Now, are you ready to take the leap?
