5 Tips for a Faster Closing For Foreign National Home Buyers
Foreign national and non-US resident home buyers face particular challenges in getting home mortgages because of the lack of US income. While many banks do not offer financing for such borrowers, there are banks that specifically cater to foreign national borrowers. Here are some tips for foreign nationals to minimize delays in financing:
Identify Lenders who are experienced in lending to foreign nationals – While a lender may claim they offer foreign national loans, not all are created equal. It is important to find a lender who is well versed and has a good track record in underwriting, approving and funding the loan efficiently. This can make the difference between getting the house and losing it to another buyer.
Be familiar with the Lender’s Underwriting Criteria – Is the lender underwriting the loan based on debt-to-income (DTI), or debt-to-assets (DTA), or both? For foreign national clients without US income, DTA underwriting may be an ideal way to get approved on a loan. Lenders will look directly at the borrower’s existing liquid (cash) and non-liquid (real estate) assets and make a calculation to determine the borrower’s ability to repay.
Be prepared to explain your work history and be able to verify it – Even when underwriting is based on assets, lenders will ask and verify the work history (and income) of the borrower. This may require a call or written verification from the employer abroad. Be prepared to provide such information and documentation. If there’s US income, they will ask about immigration status and work permits/expiration dates.
Gift Funds and Seasoning – Foreign national borrowers who will pay part or all of the down payment through a gift from family abroad should let the lender know early and be familiar with their requirements to do so. You will also need to have a gift letter from the donor to show it was a gift. Many lenders have seasoning requirements for such gifts especially if it will be wired from abroad. This means they require a certain amount of time (money must be in a US bank for 1-3 months) before it's usable. Do not wait until closing escrow to deal with wiring money from abroad.
Source of Funds and Anti-Money Laundering – Lenders, especially banks have strict regulatory requirements to know the source of the funds to be used for the down payment and to pay for the mortgage to prevent money laundering. Without being able to clearly explain the source of funds (even gifts), the loan will be significantly delayed or altogether denied.