What are the Differences Between Foreign National Loans and Traditional Mortgages?

Navigating mortgage loans is often complex, especially for non-U.S. citizens hoping to invest in U.S. property. This article outlines the ways a foreign national loan differs from a traditional mortgage — including documentation, credit history, down payments, interest rates and loan terms. Whether you're a foreign national planning to buy U.S. real estate, or simply want to brush up on this topic, find out what distinguishes the two types.  

There are several differences between foreign national loans and traditional mortgages,  including:

• Documentation — Foreign nationals will typically need to provide more documentation to lenders, such as their passports, visas, job offer letters, bank statements (foreign and/or domestic), and tax returns.
• Credit History — Foreign nationals may not have a U.S. credit history, which can make qualifying for a mortgage more difficult. Some lenders will do loans for borrowers with no credit history, while others require credit from their foreign country, or 12-24 months of established credit in the United States.
• Down payment — Foreign nationals may need to bring more money to the mortgage than U.S. citizens. It’s common to see a 30-50% down payment required on a foreign national mortgage.
• Interest Rates — Foreign nationals usually see their interest rate averaging 1.00% higher than U.S. citizens, as there is potentially a higher risk of default.
• Term — Foreign national mortgage loans may have shorter and more stringent terms than traditional mortgages. We see the shorter-term loans primarily with hard money bridge loans that commonly have a 12-month balloon payment. Bank portfolio loans may have a 5, 7, or 10-year fixed-rate period and even a balloon payment clause.  

The differences between foreign national loans and traditional mortgages are in the underwriting requirements, pricing and terms. Foreign national borrowers must provide more citizenship documentation, work and employment paperwork, and some proof of credit history. Additionally, these loans have about 1.00% higher interest rates than those for a U.S. citizen, and may have shorter terms for bank portfolio loans.