HOW TO GET A MORTGAGE CREDIT FOR FOREIGNERS IN THE US
One of the most important financial decisions a person can make is buying a home in a new country as a foreign citizen. Mortgage rates in the United States are low, and now might be the perfect time to take advantage of them! However, if you are not a US citizen with an established credit history in the United States, it may seem like there is no way you will be approved for this type of loan.
The truth is that there are mortgage lenders in the United States that offer mortgage options to foreign national borrowers with no credit history in the United States at competitive rates, this applies to both newcomers to the United States with visas and non-resident buyers. of real estate in the United States.
This blog post will explore the various mortgage options available to foreign nationals with no credit history who wish to purchase property in the United States.
This article will discuss the high-level landscape of international real estate transactions in the United States and how foreign nationals can obtain a mortgage loan or financing without a credit history in the United States.
Foreign Domestic Mortgages for Immigrants and Nonresident Buyers
In 2021 (Apr'20-Mar'21), 61% of all nonresident alien buyers made a cash purchase, while 66% of American newcomers on nonimmigrant visas financed their home through a American mortgage, most waiting more than 2 years to establish a credit history in the United States. Therefore, there is a general lack of knowledge about the financing options available to you as a foreign buyer with little or no US credit history.
This could explain why newcomers to the United States typically wait 2-3 years to establish credit before purchasing a home and is one of the drivers for non-resident buyers to make cash home purchases.
Newcomers to the United States on visas have a higher median salary than the average American worker and an essential need to build good credit in the United States, making them an anecdotally low credit risk. The non-resident investor in real estate in the United States is generally high net worth clients with good credit in their country of origin.
This understanding has led to the development and growth of creative mortgage programs for foreigners with little or no US credit history, including recent immigrants to the US on visas and non-residents.
Trend of housing financing by foreigners, Source
Step-by-Step Process for Obtaining Foreign National Mortgage Loans in the United States
The following is a process for obtaining a US mortgage for foreigners with no US credit history. He also explains the US mortgage process from the perspective of a foreign borrower:
Step 1 – Calculate your budget: How much house can you afford?
The first thing to consider when financing a home in the United States as a foreign national is how much you can afford as your maximum monthly payment rather than the purchase price of the home, since this is what you will pay each month.
Mortgage lenders use two main methods to calculate your maximum monthly payment: the front-end and the back-end. The front-end ratio considers all the costs of your home, including property taxes, homeowners association dues, etc., while the back-end calculation does not consider these additional fees.
So when considering how much home you can afford, consider the following components of your monthly payment:
- Capital and mortgage interest
- Property taxes (your monthly payments are placed in an escrow account, where they are used to pay your real estate taxes)
- Homeowners Insurance Premiums
- Homeowners Association Dues/Assessments (if applicable)
Step 2 – Get mortgage pre-approval for your foreign mortgage
As a foreign national, whether you are purchasing a home in the United States to live in or use as an investment property, home financing solutions are available with no credit history in the United States to meet your needs. These are US mortgage lenders specializing in foreign domestic mortgage loans and take into account non-traditional data points to assess your credit risk, including your credit history outside of the United States.
Getting pre-approved for a foreign domestic mortgage loan will give you the confidence of knowing how much your lender will lend you before you start your search. In this way, real estate agents will know in advance whether or not a buyer knows what he wants and will take it more seriously.
This allows them to spend more time alone with buyers interested in the property. It also reassures sellers of potential buyers' seriousness and may allow them to take less risk with their own homes throughout the negotiations.
Step 3 – Prepare your documents for a foreign mortgage loan
To get pre-approved for your foreign mortgage loan, you'll generally need documents that verify three things: First and foremost is identity verification. Second are income statements that demonstrate the ability to make payments on a new home. And finally, there must be evidence of assets such as stocks or savings accounts that can help with the down payment costs associated with buying property abroad.
There will be additional document requirements for international customers in addition to those outlined above:
- passport copy
- Valid US visa, unless the country participates in the Visa Waiver Program
- You may need to complete the International Credit Report Form provided by the lender
- Two years of employment history with contact information
- Two years of residency history (to include address, ownership/rental, start and end dates)
Understanding the International Credit Report
US lenders may use an International Credit Report (ICR) to determine your eligibility for a foreign or international domestic mortgage product if you have no US credit history or poor US credit history. These foreign credit reports are third-party reports used to collect credit information from your home country or any country where you may have a financial history. For example, this report provides data such as the following:
- Credit history of the foreign applicant in the country of origin, if applicable.
- Property inside and outside the US
- Property taxes and insurance amounts
- Public Records: Liens, Judgments, Foreclosures
- Verification of two years of employment history
- Verification of two-year residency history
In most situations, the lender will order an ICR for you after obtaining the required details from you.
Step 4 – Buy your house and make an offer
Now that you've been pre-approved for an international mortgage, it's time for the fun part: the home search. First, find a good agent with experience in international real estate transactions and qualified certification, such as a designation CIPS (Certified International Property Specialist) in the United States.
Your real estate agent will guide you through the home buying experience in the UNITED STATES. and help you find the ideal property. After selecting one of them, it's time to make an offer! Your real estate agent will help structure the offer and incorporate contingencies that must be met before the deal is completed.
You will work with your real estate agent to draft an agreement to purchase a home in the United States. This home purchase includes your offer to purchase and any property that appears within the home that you wish to include with that sale. It is at the stage of the letter of offer that you will give a deposit of serious money. This is money given to the seller to show their intent to purchase, and is usually a percentage of the purchase price.
Step 5 – Finalize your foreign national mortgage loan application
After you have finalized your offer with a purchase agreement, you are ready to begin the mortgage application process with the lender that specializes in foreign mortgages in the United States and finalize the terms of the loan.
You will need to consider: 1) types of mortgages 2) compare their respective rates 3) settle a down payment amount 4) choose a term length.
Completing your paperwork is the next step. Although you may have already completed a good deal of your application paperwork during pre-approval, you will still need to gather the final paperwork as described in Step 3 above. Also, loan officers will need any information you haven't already provided about your debts, assets, credit, and income.
Within three business days of the request, your loan officer must provide you with a loan estimate. The Loan Estimate provides you with an estimate of the terms of your home loan and closing costs (also called closing fees or costs to complete your mortgage transaction) if you are approved for a home loan. With this information, you can evaluate your home loan offer and even explore a few other possibilities before accepting it. Additionally, you can refer to our guide Mortgage Loan Estimates: Everything You Need to Know, for a detailed understanding of loan estimates and the various costs involved in the mortgage process in the United States. for foreigners
Step 6 – Lock in the interest rate on your home loan
In the United States, mortgage rates fluctuate daily based on the bond market. Locking in your mortgage rate will ensure that your interest rate stays the same until loan closing. Your loan officer will help you with the rate lock process. In general, you should consider locking your loan rate once you decide to accept the loan estimate and move forward with the lender for your US home financing needs.
Step 7 – Mortgage Loan Processing and Underwriting
Once you have accepted and signed your Loan Estimate, loan processing will begin. At this stage, you'll work with a loan processor whose job it is to prepare your mortgage loan information and application for submission to the underwriter. The loan processor will ensure that all documentation necessary to decide on your loan file is included in the submission to the underwriter. A well-processed loan application can help speed up your home loan approval process.
Your mortgage insurer is the authorized professional to assess whether you qualify for the mortgage loan based on the lender's underwriting guidelines. An underwriter will verify your income, assets, employment and other information related to your mortgage application during the underwriting process and decide to approve or deny the loan. The insurer may request additional documentation as necessary to make this decision.
Step 8 – Carry out the property appraisal
During the underwriting process, your lender will review the home appraisal report that a real estate appraiser would have prepared at the lender's request. The real estate appraiser's job is to look at the property you are buying and determine how much it is worth (or its fair market value). Real estate appraisers determine a home's value in a variety of ways, including comparing similar homes recently sold nearby. The appraisal protects the buyer and the lender by confirming that the home is worth the agreed price.
If the appraisal is lower than your asking price, you have three options: You can offer to pay the difference, re-negotiate with them, settle, or back out if you had an appraisal clause in the purchase agreement.
Step 9 – Prepare for Closing
Congratulations, the hard part is over with the completion of the subscription process. The hard work you put into the subscription process has paid off, and now it's time for closing day! You will bring your photo ID, a copy of your Closing Disclosure, and any other final paperwork to the settlement table, as well as any necessary funds. You are finally here, taking possession of this incredible home that will be YOUR HOME in the United States!
Your loan officer or processor must provide you with a copy of the Closing Disclosure at least three business days before you sign the loan documents. This document discloses the actual amounts you will pay for the various fees and services associated with closing your mortgage loan.
If everything is in order, you will sign all your documents, receive your keys, and that way you are a homeowner! Congratulations on purchasing a home in the United States as a foreign citizen.
Now that you understand the mortgage process for a foreign national, are you ready to get started? Then you can go ahead and start the pre-approval process for a foreign national loan.
Can a foreigner apply for a mortgage loan?
Yes, there are financial institutions in the United States that offer foreign national mortgages to non-US citizens, both US residents and non-resident investors, at competitive rates with no US credit.
What is a foreign national loan program?
Certain lenders in the United States offer foreign national loan programs designed for newcomers or non-residents of the United States without credit in the United States.
Can non-residents apply for mortgages?
Yes, non-residents can apply for mortgages with certain US lenders. These lenders use credit information from your home country or non-traditional data points to determine credit risk.
Can a US financial institution do international mortgages?
Yes, certain US financial institutions can make international mortgages based on credit information from your home country or non-traditional data points to determine credit risk.
Can you buy a house in the United States without credit?
Yes, you can buy a house in the United States without established credit in the United States. In addition, there are mortgage financing options available in the United States for foreigners with no credit in the United States.