Many folks who live and/or work outside the United States would like to own property here. Whether it’s a vacation home in Malibu or Lake Tahoe, a pied-à-terre in San Francisco, a 2nd home base in LA or even living space for their college-bound children in San Diego or Berkeley, Sierra Lending can help “Foreign Nationals” get a loan to buy such a home.
What Do I Need
The approval process for Foreign Nationals is similar to conventional borrowers. Income, assets, creditworthiness, etc. are all reviewed to determine how large a loan can be provided.
Income and Assets
As with any mortgage on a residence, a borrower needs an income and/or other means to support the monthly payments and other expenses associated with owning a home. The income would also be sufficient to support any other expenses you have. Foreign Nationals, unlike conventional US borrowers, have the added wrinkle of income or assets that may be earned or custodied outside the US. Your assets may also be denominated in non-US currency. Sierra is experienced with these issues and is used to working with borrowers with these circumstances. Sierra will translate any necessary documents such as wage statements, tax returns, bank statements, etc. to English. Sierra will also do currency conversions to US$. This allows Sierra to verify the your income and other assets to ensure you have the means to make the necessary payments, as well as any necessary reserves.
Another difference between conventional borrowers and Foreign Nationals is how credit history or rating is determined. In the US, borrowers generally have a standardized credit score, usually referred to as a FICO-score. Many, but not all, other countries have their own credit reporting agencies. For example, in Mexico, Sierra finds that the credit report actually is more comprehensive than that used by US reporting agencies. Sierra routinely works with other countries’ credit reporting agencies to determine credit worthiness. In the case where a country does not have standard reporting agencies, Sierra can work with a your credit line providers directly to determine creditworthiness. As with income verification, Sierra will translate any necessary documents and convert the currency to US$.
Most loans require you to put up a down payment. Foreign Nationals should be prepared to make a down payment of 25% towards the purchase of their home. Additionally, the down payment funds must be held in a bona fide financial institution. Sierra will translate and perform currency conversion if necessary. While the funds to be used as the down payment can be held in a non-US bank in any currency, you will eventually need to wire those funds as US$ to an escrow company when the purchase of the home is finalized.
Lenders look at your “ability to repay” the loan as one of the most important indicators of whether to extend a loan to you. In fact, the US Consumer Finance Protection Bureau requires lenders by law to ensure that borrowers can repay their mortgage. One of the most important tests of your ability to repay is your history of paying your rent or other housing expenses. We will examine statements, cancelled checks, etc. to determine that you have been paying your housing expenses on time. If you have been paying your housing expenses on time, we will further determine your ability to repay using something called the Debt to Income Ratio. The debt to income ratio, or DTI, is a formula that lenders use to see how much of your income you are using to pay off existing debt. Simply stated, it’s all your debt divided by all your income.
Must I live in the home I buy as a foreign national
The short answer is “No”. A family member living there instead of yourself or you use the property only occasionally are two of the most common examples. In some circumstances, Sierra will also allow the property to be rented out.
As you can see there are easy ways for Foreign Nationals to buy property in California or Texas.