Every year there are thousands of non-US based foreign nationals that purchase an investment property in the United States. Many other international investors may have wanted to although the lack of financing options may have halted their plans.
Mortgage lenders sometimes refuse to finance real estate deals outside their home country blocking the investor’s American dream. Financing in the American real estate market for foreign nationals could have been difficult, costly, and at times unavailable.
As the years have advanced, new options and opportunities to receive a mortgage loan have opened up. Home loans in the USA for foreigners can still be demanding at times but there are several factors that can help. This can assist investors reach their dream of owning a property in the United States and make property more accessible.
There are a few basic factors that can make your US mortgage loan application successful even if you are a foreigner.
A Solid Credit History
A good credit report and a solid track record of positive credit history can do a lot of good with lenders. The higher your credit score is, the more likely your loan application will be approved. Even then some lenders in the USA may be skeptical of a foreign credit report.
Typically, they may ask for additional documentation and information including bank statements from your local banking authority. This is the first step in getting approved for a home loan in the USA.
Property in Your Home Country
Owning a property in your home country can make a difference when applying for a mortgage loan in the USA. This is especially true if the property has been considered to have a high resale value. While US banking authorities may still view overseas properties with some skepticism, it does increase the chances of a foreign national mortgage loan getting approved.
A Stable Source of Income
A reliable source of income is key for a mortgage provider to consider an application. The source of funds can vary, as long as it is stable and shows the investor can afford the monthly payments it should suffice. This can include a salary pay-slips, a fixed deposit, monthly returns from investments, and retirement funds. Even with a stable source of income and a strong credit history, some mortgage lenders in the USA may be wary of international investors.
Your Personal Demographic Data
Age tends to play a big part for many lenders and financial institutions. Typically a mortgage broker is more likely to approve a loan application for a younger applicant than an older one.
Mortgage applicants over the age of 50 may face even more difficulties, even if they are permanent residents. You may want to shorten the mortgage period and consider a larger down payment to get approved if you are over 50.
Mortgage Down Payment
Down payments are a big part of getting a mortgage approved in the United States. While the requirements tend to be lower in America than other parts of the world, it is a big factor for lenders.
The average down payment in the USA tends to be 12% of the borrower’s loan value. This can vary based on credit scores, however. Non residents may want to consider a larger down payment amount relative to the loan amount when purchasing an investment property in the US. A higher down payment also tends to lead to lower monthly mortgage payments.
The location of the asset may play a part in getting a mortgage approved. Most lenders require a connection to a main road essential to even applying for a mortgage.
Typically the closer the property is to an urban hub the better. It will increase the chances a lender or financial institution will approve a mortgage. This is because the volume of real estate deals tends to be higher in urban and suburban areas as opposed to rural ones. This lowers the risk from the side of the lender and increases a real estate investor’s chances of approval.
Purchase Price & Type of Asset
The purchase price and type of a real estate asset may play a part in getting approved for a mortgage. Certain types of properties such as mobile homes, prefabricated homes, and tiny-houses may face lower approval rates for home loans or mortgages by lenders.
Additionally properties with a low market value may also face extra scrutiny by mortgage providers. The general minimum market value of a property required to obtain a standard mortgage by most providers tends to hover around $100,000.
Other Considerations for Investors
As foreign investors tend to not reside in the US, they can locate professionals that can help them throughout the process of purchasing a home. Having the right professionals can make a big difference & boost the profitability of an asset such as property.
The right realtor will not only locate a property you may like, but they will also be your representative when closing a property deal. This is especially important when purchasing a property remotely. They will keep you up to date during the process and help you close a deal in your favor. In certain situations, they can help negotiate the price of a property or real estate investment lower.
For international investors, there are also realtors with CIPS (Certified International Property Specialists) certification. Realtors with CIPS certification tend to specialize in assisting international clients. Additionally, they tend to speak an additional language and are familiar with their clientele’s culture to a certain degree. This could make the process much easier for investors not based in the US.
Since foreign investors tend to not reside in the US, managing an investment property can be difficult. As such many hire a property manager. The property manager will assist the tenant with any issue that could pop up. A good property manager will be available when needed and keeps tenants happy and a good landlord knows a happy tenant is good for business.
A good property manager could make a tenant reside in the property for years, even as rent prices rise. This can help avoid scenarios where the landlord will constantly need to find a new tenant to rent the property and ensure long-term profitability.
Property and real estate aren’t too different from other investments and taxes should be considered. As with nearly any investment, the government would like a piece of the profit and taxes are an inevitable fact of life.
In order to maximize the profit, and avoid unnecessary expenses, having a meeting with a CPA or certified accountant is highly recommended. An accountant can make sure that you are not overpaying or underpaying taxes and that your finances are in order. A good accountant may also be familiar with the taxation laws of the investor’s country of residence as well as US laws.
Some international investors form an LLC and hold their properties under the LLC. An LLC is a limited liability company that shields owners from personal responsibility in case of lawsuits or disputes.
The process of forming an LLC can require anywhere between 14 to 21 business days depending on the state in which it is formed. There is also a small price tag involved when forming an LLC which may vary from state to state. Some states charge as low as $200 to file the paperwork, while in others it can reach $800. On average, however, it is typically around $500 on average.
Tax considerations can play a part in the profitability of any investment. As such, investors should consult with an expert on the subject in order to make the most out of it.
Avoid impasses, hire professional mortgage lenders
Mortgage lenders such as USA-Mortgages.com quickly and efficiently process your application. The initial steps are almost automatic and take place seamlessly. Further down the line, our consultants use insider information to find the best loans for you. They also assist you in making your application strong and formidable.