Lending in the Time of COVID-19 (Volume 4): Foreign national loans for sunny Florida homes!

In this series of guides (“Lending in the Time of COVID-19”), we explore your mortgage loan options, despite the COVID-19 pandemic. Creative and flexible loan solutions are still available, and we continue to monitor the situation and keep our finger on the pulse as to who is lending. To access all the volumes in this series, go to our “Series” page here.

If you are a foreign national looking to invest in Florida residential real estate, you are not alone. When compared to national statistics, Florida is a hotbed of activity for foreign nationals.  

How do you make yourself stand out from the crowd? And how do you ensure you make prudent financial choices when it comes to your Florida real estate investment?

The answer is, “Knowledge is power.”

For instance, the majority of foreign nationals (67% by the latest statistics) purchase Florida real estate all in cash, instead of taking out a mortgage loan. However, don’t let that statistic deceive you into thinking that all-cash is the way to go.

Cash may be king, but it is indeed possible for foreign nationals to secure financing for their U.S. real estate investment projects, without resorting to paying all in cash.

True, compared to permanent residents with green cards and non-permanent residents with work visas, foreign nationals (who hold no status in the United States) may have fewer loan options.  

Moreover, the coronavirus pandemic has caused many lenders to temporarily cease their non-U.S.-citizen mortgage programs.

Nevertheless, despite COVID-19, there are still many creative loan programs custom-tailored for foreign nationals looking to purchase or refinance a second home or investment property in the United States.

Consider these hypothetical situations:

• Fiona wants to purchase a vacation home on the beach for $1 million and needs to find a lender who will provide her with a jumbo loan at 70% loan-to-value (LTV) and allow her to qualify without having to provide tax returns.
• Frank already owns an investment property (a high-rise luxury condominium unit) and needs to find a lender who will let him do a cash-out refinance so that he can pull out $1.5 million and purchase another investment property (a short-term rental property).
• Felix would like to buy a fixer-upper (a duplex) to renovate and flip within a year and needs to find a lender who will provide him financing despite his minimal level of fix-and-flip experience.

Would you be surprised to learn that, not only can Fiona, Frank, and Felix find a lender to satisfy their needs, but also that they are all foreign nationals? Again, knowledge is power. Before jumping to the conclusion that foreign nationals have limited mortgage loan options, read on to discover how limitless their options really are.

Foreign national mortgage loans are available for all purposes

Foreign nationals can get mortgage loans for any purpose (purchase, refinance, renovation, and rental portfolio).

Purchasing and refinancing

Foreign nationals (also known as “non-resident aliens” or “NRA”) have access to loan programs allowing them to do much more than just purchase U.S. real estate.

Non-resident aliens can also refinance the U.S. properties they already own.

In fact, foreign nationals are eligible to do a cash-out refinance at a loan amount up to $5 million with unlimited cash in hand. 

Some lenders even allow cash-out refinances with no title seasoning requirement. This means the borrower does not need to have owned the property for a certain amount of time before refinancing.

Non-resident aliens can also do a rate-and-term refinance if they want to just lower their interest rate without pulling out cash.

Fixing-and-flipping and rental portfolio loans

Moreover, foreign national borrowers have access to fix-and-flip bridge loans to finance their purchase and rehab of 1-4 unit properties. These programs are available even to non-resident aliens with no prior fix-and-flip experience.

Even further, some lenders allow foreign nationals to participate in their rental portfolio loan programs to purchase and/or refinance multiple investment properties under a single, blanket loan.

To learn more about rental investment loans that are available despite COVID-19, please click here.

Flexible loan amounts, LTVs, and terms are available for non-resident alien borrowers

Non-resident aliens can borrow up to $25 million under quite flexible terms.

With jumbo and super-jumbo loan amounts up to $25 million, the sky is the limit for non-resident aliens. 

Many lenders provide a maximum LTV of 50% to 65%.

However, other lenders allow a higher maximum LTV of 70% if a foreign credit report is provided.

For purchases, therefore, non-resident aliens should expect to make a down payment ranging from 30% to 50% of the purchase price. (For refinances, the LTV is measured as the percentage of the appraised value.)

For smaller projects, some foreign national programs have minimum loan amounts around $300,000.

Available terms include 3/1, 5/1, 7/1, and 10/1 annual rate mortgages (ARMs). Interest-only payments are an option.

Shorter-term bridge loans (12-24 months) without prepayment penalties are also available.

Any property type can be financed under non-resident alien loan programs

Foreign national loans are available for any property type imaginable.

When it comes to loans, foreign nationals are not limited to single-family homes.

Instead, lenders have foreign national programs for all imaginable property types, including:

• Single-family residences;
• Condominiums, including non-warrantable condominiums and high-rise condominiums;
• Condotels or condo-hotels (short-term rental properties);
• Co-ops;
• 2-4 unit properties;
• Hobby farms; and
• Vacant land.

Different occupancy types (investment or second/vacation home) for foreign national mortgages are allowed 

For foreign national loans, the subject property may be used as an investment property or a second/vacation home.

Under these loan programs, foreign nationals can use the subject property as an investment property or as a second home, just not as a primary residence.

For investment properties (also known as non-owner-occupied properties), the borrower cannot occupy the property but instead must rent it out to third parties.

For second homes (also referred to as vacation homes), many lenders require that the property be located in a vacation or resort area. Otherwise, if the property is in a metropolitan area, the lender may consider it to be an investment property instead of a vacation home.

There are several qualification methods for foreign national borrowers

Non-resident aliens can qualify based on different levels of documentation — from full to none.

Full documentation

For the best rates and terms, foreign national borrowers can provide full documentation of their income and liabilities, to allow the lender to calculate their debt-to-income ratio (DTI). Under this route, the borrower must provide:

• Foreign tax returns;
• W-2 equivalents;
• Paystubs; 
• Bank statements; and
• Foreign credit reports.

Alternative documentation

For those borrowers unable or unwilling to go the full-doc route, there are alternative documentation programs, where foreign tax returns are not required.

For example, some lenders allow foreign nationals to qualify under their asset depletion program.

• This program works well for non-resident aliens who have a high net worth, but little to no monthly income.
• “Asset depletion” is a method of calculating a monthly income stream based on the borrower’s assets.
• Despite its name, this program doesn’t require the borrower to actually “deplete” or liquidate any assets. “Asset depletion” is an underwriting tool only.
• In other words, this program works great for borrowers who have high DTIs. 

No documentation

For foreign national borrowers looking to provide no documentation at all regarding their personal income, there are hard money loans, where the lender will focus solely on the value of the property.  

However, the trade-off (and drawback) of these loans is a high interest rate usually in the double-digits.

On the other hand, hard money loans may be the only available option for foreign nationals who hail from countries that are perceived as particularly risky (e.g., Cuba, Egypt, Iran, Iraq, Russia, Syria, Ukraine, and Venezuela). 

Options to streamline

Finally, many foreign national programs have bells and whistles designed to streamline the loan process, including:

• U.S. credit score or foreign credit report is not mandatory;
• No ITIN or SSN necessary;
• Foreign assets may be used for the down payment and reserves;
• CPA letters are accepted in lieu of foreign tax returns and paystubs;
• Gift funds to help pay for the down payment and reserves are allowed on a case-by-case basis; and
• Rush closings (about 2 weeks) are available.

Parting Words

Many foreign nationals believe that they are not eligible for U.S. mortgage loans, particularly given the COVID-19 pandemic. Or perhaps they have already had their loan application denied, and, believing they have nowhere else to turn, are convinced they must do an all-cash transaction.

They would be pleasantly surprised to learn, however, that there are many lenders currently offering loan options for foreign nationals looking to finance their U.S. residential real estate investment projects.

It is possible to find lenders with creative and flexible foreign national programs to satisfy all real estate investment goals.

Please contact us at 321-239-2781 or [email protected] or by clicking here to learn more about these innovative foreign national loans, including interest rates, eligibility in other U.S. states besides Florida, and other details.