It is becoming more and more common for overseas buyers to secure housing in the United States. Up until recently, foreign nationals found it easy to afford a home in the U.S. because of the falling value of the dollar and the real estate industry. Buyers from overseas were easily able to afford homes with cash – they did not need a mortgage. Fast forward to today and the dollar is stronger and the real estate market appreciating, which means foreign nationals cannot as easily afford the homes. This does not preclude overseas homebuyers from becoming a part of the market, though. They just need to be able to secure mortgage financing in the United States.
What are Overseas Buyers?
Overseas buyers are people who live in another country but visit the U.S. often enough to want to purchase a home here. Typically, these people work in their home country, but come to the U.S. for several months at a time. This could be for vacation or business purposes, but they spend significant time in the U.S. These people do not have green cards or any type of citizenship in the United States. All of their qualifying factors will come from their home country, which can extend the loan process much longer than it would for a United States citizen.
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Qualifying for an Overseas Loan
The qualification process overseas buyers go through is much the same as we go through as citizens. They have to prove their income, employment, assets and credit worthiness. Because the home is not the primary home for these buyers, lenders are at a higher risk for default. To make up for this risk and the fact that they will use income from abroad to qualify, most lenders require a hefty down payment of between 40-50%. There are some lenders who will accept less, but this is the average. The type of home a person purchases will help to determine the amount of the down payment as will the person’s financial picture. For example, a person purchasing a condo poses a higher risk than a person purchasing a single family property does. Another example is a borrower who never purchased a home in the U.S. before. Since he does not have the experience in investment or second homes, the lender takes a serious change offering him financing.
In order to qualify for a loan, foreign nationals need to prove their identity with their passport as well as their Tax Identification Number. This is much the same way we would prove our identity with our social security number. In addition, they must provide:
- Income for the last two years from the same employer. The proof must originate from an accountant in order for it to count to ensure its validity as the income is usually in the form of tax returns.
- The validity of the company the overseas buyer claims to work for to ensure its stability.
- Adequate credit scores from their country.
- Enough assets for the required down payment as well as any required monthly reserves the lender needs the buyer to have on hand. Most lenders require at least 12 months’ reserves on hand.
Where to Find Loans
There are many lenders which offer overseas loans today, but the most common are those which have offices here in the U.S. as well as in the buyer’s home country. This helps to cut down on some of the unknowns with using the country’s credit scores and income. When you use a bank who operates in your country as well, the process goes smoother and the likelihood of approval is higher.
If you cannot find a bank who operates in your country, stick with lenders who offer nonconforming loans. Fannie Mae and Freddie Mac will not purchase these loans. The lender either keeps the loans on its own books or sells it to an investor other than Fannie or Freddie.
Overseas buyers have many opportunities to purchase a home here in the United States. The process will be lengthy and require extensive back and forth between the two countries, but it can be done. If you wish to purchase a home in the U.S. as a foreign national, make sure to have plenty of assets handy and stable income to provide the lender. The more attractive your application, the more likely it is for you to secure loan approval.