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What are the Interest Rates on a Foreign National Mortgage?

Interest rates on a foreign national mortgage depend on a number of factors, including the lender, the type of loan, the borrower’s credit score (or lack thereof), and the amount of the down payment. 

The general rule of thumb is to expect that interest rates will be approximately 1.00% higher on a foreign national mortgage than that for a natural U.S. citizen. In general, interest rates for foreign national mortgage loans are 0.875% to 1.00% higher than interest rates for loans to U.S. citizens.

There are several reasons foreign national mortgage loans have higher interest rates:

  1. Default Risk: If a foreign national defaults on payments, it can be difficult for the lender to contact them to discuss loss mitigation options. (“Loss mitigation” is a fancy way of saying debt collection.)
  2. Employment: If the foreign national is only temporarily employed in the U.S., the lender will face a greater future default risk.
  3. Availability of Credit: Some lenders offer a generous number of loan programs to U.S. citizens — and none for foreign national borrowers. Even if your bank is in the United States, it may be unable to offer you a mortgage as a foreign national.
  4. Underwriting is Labor Intensive: Underwriting a foreign national loan is usually time consuming, with many additional details to verify. With more time and energy comes more costs, which are reflected in the upfront fees, interest rate, or both.
  5. Capital Safety: Some countries lack the established laws and legal protections of the United States. A foreign national borrower's bank account in their home country might not have deposit insurance protecting their assets like the Federal Deposit Insurance Corporation (FDIC) does for U.S. banks. 

When applying for financing, expect the interest rates on a foreign national mortgage to be approximately 1.00% higher than for U.S. citizens. Lenders underwrite foreign national mortgages by factoring in the added risks listed above that could impact the future loan performance. Mortgage companies use the interest rate to price the credit risk for foreign national borrowers.

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