Robert Spinosa, a Marin County Mortgage professional, provides an excellent overview of the process of getting a loan for non-residents of the U.S.
Too often in mortgage lending we are reminded of the divide that exists between the way things are and the way they ought to be. Nowhere is this more evident than in the financing options available to non-permanent resident aliens and foreign nationals of the United States. Maybe due to misconceptions they harbor at the outset, and to a lot of conflicting information that follows, our international clients sense they will be prevented from taking action on their dreams to become homeowners in the US. Let’s attempt to cross this sea of confusion together.
The first thing we must do is define who is a non-permanent resident alien, and who is a foreign national. In general, we can use these guides:
Non-Permanent Resident Alien: A non-permanent resident alien (NPRA) will have a work visa (H1-B, for example), and will have a social security number. A NPRA will be buying a primary home here in the US because they’ll be employed here too.
Foreign National: A foreign national, also known as an “international borrower” will have neither a social security number nor a visa.a a secondary residence here in the United States. A foreign national will need to obtain an individual tax identification number (ITIN) in the process of obtaining a home loan.
OK, so now that we’ve spelled out the characteristics of both, let’s jump back to my earlier observation about there being the way we wish things were and “reality.” Technically, your NPRA buyers should be able to avail themselves of most of the same financing options to which their permanent (that is, “permanent resident alien” or “green card”) counterparts have access. What I’m talking about here are fixed rate loans at competitive rates, backed by the government sponsored entities Fannie Mae and Freddie Mac (the “GSE’s”). Down payment requirements should therefore be less as well, and would depend on the size of the loan.
So why don’t more visa holders know this to be true? As with US citizens and permanent resident aliens, ALL borrowers in the current loan environment are put through the same one-size-fits-all qualification mill. This translates (no pun intended) to a credit report, paystubs, two years of W-2 forms and tax returns, and bank statements covering at least two months. Often a NPRA will simply not have the history of filing US taxes or establishing US credit. Yes, these buyers would be eligible solely based on their citizenship status, but they do not meet all of the necessary requirements to obtain approval. So where do they turn next?
These buyers must go to portfolio lenders. These are the financial institutions that make their own loans funded by their own deposits, independent of GSE guidelines. Our portfolio options for NPRA’s start with a 30% down payment requirement, but they allow for use of foreign assets in well-known institutions, foreign credit reports or letters of credit, tax return equivalents from the country of origin, and so on. In essence, we are working to use what CAN be provided in order to make the loan, rather than looking at what cannot be provided to turn the loan away. The catch? Of course, this loan is inherently perceived as being riskier and it’s subject to slightly higher rates and terms that are often not fixed for the entire 30-year loan period. Can these programs still be very appealing and impart great benefit? Yes. That’s why they exist and why banks make them. Let us not forget we are a country of immigrants. Let’s not forget the history of A.P. Giannini and the Bank of Italy. Let’s not forget the high degree of skills and ingenuity that come over with those work visas. Turning away all of these high-potential clients from the dream of home ownership is clearly not in every bank’s interest.
Finally, let’s cover foreign nationals — perhaps a bit simpler to do because there are no conventional, conforming loan programs that would accommodate those who do not possess a green card, visa or social security number. Buyers who retain international citizenship but wish to purchase a secondary residence here will be looking at some type of portfolio loan. We start with a 40% down payment requirement for these buyers and we will, by definition, accommodate their international income, assets and credit. An example of who fits this bill? A foreign buyer who spends a good deal of time living and working in the US, but does not plan to, or cannot, change his/her immigration and citizenship status. This loan program, in basic terms, allows this individual to own a second home here in the States. Note that international investors are again a different classification and the loans that we make are not aimed at facilitating the acquisition of a portfolio of US investment properties. This is mostly the arena of private, or hard, money.
Like with every other form of mortgage lending, loans made to non-permanent resident aliens and foreign nationals could benefit from a greater public understanding. Each day in my profession I work to dispel the confusion that is often brought about not by bad intention, but by conflicting and even incomplete information and explanation. The internet does a great job of making data accessible. It sometimes does a not-so-good a job of filtering what applies to any individual scenario. What we’ve covered above addresses more clearly some of the more foreign concepts of the lending standards that apply to our international colleagues and neighbors, so call or e-mail if you need my help today.