Foreign National mortgages: Step by step guide
August 14, 2023 • 6 min read
First things first, who are considered foreign nationals?
When diving into the U.S. real estate market as a non-U.S. citizen, it's crucial to pinpoint where you stand in the mortgage application landscape. Foreign nationals are individuals who hold citizenship in countries outside the U.S. and maintain their primary residences beyond American borders. Unlike U.S. citizens, foreign nationals typically don't have access to conventional mortgage loans. Instead, they often require specialized home loan solutions from specialized lenders, like Milo. In contrast, permanent residents or green card holders are authorized to live and work in the U.S., enjoying rights akin to U.S. citizens, including favorable loan terms. If you've recently achieved permanent residency and still building a U.S based credit history, you might want to consider still applying as a foreign national.
Meanwhile, temporary residents are here for specific, short-term purposes based on their visa type, and while they might be eligible for U.S. residential loans, their visa specifics could introduce more hoops to jump through.
Step 1: Estimate your budget
Before diving into property listings, understand your financial capacity. How much home can you afford? While Milo evaluates your assets, the true potential of investment properties lies in their income-earning capability. We consider your rental income against monthly mortgage obligations. Remember, down payments for investment properties tend to be higher.
Utilize our pre-qualification tool to receive a preliminary budget estimate and interest rates. This is an invaluable tool whether you're just beginning your search or have found your dream investment.
Step 2: Find your property
As a foreign national, your property's occupancy type should reflect your residency status. Since your primary residence is outside the U.S., you can opt for:
Second or vacation home: This requires the property to be located in a vacation or resort area. If your property is in a metropolitan area, lenders might consider it as an investment property.
Investment property: Also known as non-owner-occupied property. As a foreign-national borrower, you cannot reside in this property. It should be rented out, serving as a form of investment. Note that investment properties usually have higher interest rates and lower LTVs.
Step 3: Discover your loan options
While many might be unfamiliar with specialized loan options tailored for foreign investors, at Milo, we offer innovative loan programs, designed with global investors in mind. We use our intuitive web application to evaluate each customer’s specific situation and goals and recommend the best loan program and terms so our clientele doesn’t have to decipher between too many complex options. Loan programs commonly advised for non-US citizens include:
DSCR Loans (Debt Service Coverage Ratio Loans): These evaluate a property's monthly rent relative to its monthly mortgage obligations. Milo specializes in DSCR loans, making it an optimal product for foreign investors.
Bridge Loans: Short-term financing options which can be beneficial if you intend to resell or refinance in the near future. They provide immediate capital but often come with higher interest rates.
Jumbo Loans: These are for large amounts, exceeding the standard loan limits. They can be ideal for luxury properties but might have stricter credit requirements.
Step 4: Apply for your mortgage
Upon solidifying your property choice and signing a purchase agreement, initiate the mortgage application process. Milo's user-friendly platform expedites this step. Upon application submission, a dedicated loan consultant will be assigned to assist you till closing.
Step 5: Assemble your documents
For a smoother process with Milo, prepare the following:
- ID’s (DL/Passport & VISA)
- Two months of bank statements
- Fully executed purchase contract
- Proof of all escrow funds
- Mortgage statement for any properties with a mortgage liability
- US Entity EIN/Tax ID Number (if buying through a corporation)
- Articles of Incorporation & Operating Agreement (if buying via a corporation)
- Two credit references
Many traditional lenders might also require foreign tax returns, W-2 equivalents, paystubs, bank statements, and foreign credit reports.
Step 6: Lock in your interest rate
Securing a favorable interest rate can significantly impact your monthly payments. Ensure you lock it in.
Step 7: Processing and underwriting
Your application undergoes a detailed review. This phase ascertains your eligibility and the property’s suitability for the loan. The timeline varies but can range from a few days to a couple of weeks. Milo aims to close within 30 days of your application submission.
Step 8: Property appraisal
An objective third party will evaluate your chosen property's value. This ensures the amount you've requested aligns with the property's market worth.
Step 9: Gear up for closing
You're almost there! Preparations for closing involve finalizing the terms, ensuring all documentation is correct, and finalizing your down payment. And the best part? With Milo, this can all be conducted virtually. Owning U.S. property has never been this straightforward, even from miles away!
Acquiring a U.S. mortgage as a foreign national may appear intricate, but with a clear roadmap and Milo by your side, your real estate aspirations can become a reality. Ready to dive into the U.S. real estate market? Let Milo be your guide.
The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
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