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What is a foreign national mortgage loan?

A foreign national mortgage loan is a specialized loan product offered by some U.S. lenders to foreign non-residents who wish to purchase U.S. real estate. These loans are specifically designed to allow foreign nationals to buy, refinance or tap into equity from their primary residence, second home or investment property.

My use of "foreign national" refers to someone seeking a mortgage in a country where they're not a citizen and don't reside. An example is a citizen of Canada or the United Kingdom who wants to purchase a house in the United States without holding citizenship in the U.S.

Foreign national mortgage loans are considered riskier by lenders because of the potential difficulties in pursuing unpaid debts across international borders. Therefore, these loans often come with more stringent requirements and conditions, such as:

  1. Higher Down Payments — Typically, foreign nationals are required to make a larger down payment, often between 30-40% of the property's value.
  2. Higher Interest Rates Lenders may charge higher interest rates on these loans due to the increased perceived risk. At First Capital Trust Deeds (FCTD), we consistently see the interest rates on long-term institutional loans are 0.75% to 1.25% higher than loans for U.S. citizens.  
  3. Proof of Legal Status — Borrowers often need to prove their legal status and provide a legitimate reason for their stay if they currently reside in the country where they wish to buy property.
  4. Proof of Income — A borrower must provide proof of verifiable and ongoing income.
  5. U.S.-Based Bank Account — Some lenders require foreign nationals to have a U.S.-based bank account to ensure they can manage the payment process efficiently.
  6. Additional Documentation Passport copies, visa information, and sometimes even a reference letter from the borrower's home country bank is required. It’s not uncommon for a lender to ask that a bank letter be sent to a translation service. 

A foreign national mortgage loan can be an excellent way for a non-resident to purchase, refinance, or tap into equity from a residential property in the United States. FCTD has worked with several dozen foreign borrowers to secure short-term bridge loans and long-term institutional financing for their properties.

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