All About Foreign National Loans

Believe it or not, the quintessential American dream of owning a home isn’t limited to Americans. As a non-U.S. citizen, you may think that it’s impossible to invest in real estate on American land. However, there are programs specifically catered to borrowers like you.

Find out how a foreign national loan could help you expand your real estate portfolio or buy a vacation home to relax in when you’re in the states.

What is a Foreign National Loan?

As with any other mortgage, a foreign national loan is meant to help you buy or refinance a home, but these types of loans are meant for people who don’t live or work in the United States. Since lenders wouldn’t be able to qualify you based on typical borrower requirements for a non-conforming loan, your guidelines will be a bit different.

Requirements and Guidelines

While specific requirements can vary between lenders, there are some general guidelines for non-U.S. citizens purchasing a home in the U.S. or refinancing an existing mortgage.

Identity

A valid passport or visa that allows you entry into the United States is generally required for foreign national loans. You may also be able to qualify with an individual taxpayer identification number or ITIN. If you find a foreign national loan won’t work for your needs, an ITIN loan could be a viable alternative.

Income

Lenders usually require proof of a source of income (such as proof of employment or bank statements) and a certain amount of cash in reserve so they know you can pay back the new loan reliably. In some cases, if you’re using the U.S. property as investment, they can qualify you based on the debt service coverage ratio (DSCR) or the potential cash flow of the investment property.

Credit

A U.S.-based credit score generally isn’t required for a foreign national loan. However, there are some cases in which you may qualify for a loan with a low U.S.-based credit score due to a limited credit history. You may also need to provide a foreign credit report to show your ability to pay back the new debt.

Down Payment

Depending on your lender, you may need to put more money down when you’re buying a home in the U.S. than with other types of loans or mortgages. The actual amount is typically based on your own specific financial situation, so you’ll need to speak with a lender to understand the breakdown of your costs.

Things to Consider Before Applying

Before diving into the loan process and committing to U.S.-based real estate, there are a few items you should think about. But one of the most important things is understanding your personal and financial goals with this investment and knowing your plan to achieve them.

Reason for Buying

Some loans that lenders offer are only for investment properties that generate cash flow. If you’re looking to buy a vacation home in the U.S., make sure that you work with a lender who offers a program for second or vacation homes specifically for foreign nationals.

Loan Types

Foreign national loans can be used for purchases, refinances or taking cash out, depending on where you get your loan from. While we’ve mainly been discussing purchase transactions, foreign national loans may also be used for borrowers who already have property in the U.S. and want to refinance their loan or potentially tap into the equity they may have built in their U.S. property and get cash out.

SSN or ITIN

In some cases, your lender may require you to obtain a social security number (SSN) or ITIN prior to your closing day. To prepare, make sure you ask your lender if you need to acquire one or the other as early in the loan process as possible.

Property Types

Some lenders limit the kind of property you buy or require the property to be in a specific location. For example, if you’re buying a second home, it may need to be located in a resort area. Typically, homes in urban or metropolitan areas are considered investment properties.

Alternative Loans

As mentioned above, an ITIN loan could be an alternative solution to a foreign national loan. These types of loans allow a borrower to apply for a mortgage loan even if they do not have a U.S. Social Security number as long as they have an individual taxpayer identification number. However, this does mean that you need to have filed taxes in the U.S.

Achieve the American Dream

The possibility of homeownership in the United States doesn’t have to end when you cross country lines. It can be possible with the right resources. 

As you prepare to research your various options, remember that even though you reside outside the states, there are professionals based in the United States who are there to assist you every step of the way. Reaching out to a lender, real estate agent or financial advisor can be beneficial for you and help make the home search and loan process easier. 

While there’s no one-size-fits-all solution to buying property in a different country, foreign national loans are designed to help borrowers like you achieve your financing goals.

This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner.