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How Does A Foreign National with No Credit Finance A Home in the U.S.?

Buying a house is by far one of the most important decisions you can make in your life. It is even more important when the house you are about to buy is in a foreign country because then, you will need to figure out how you are going to pay for it. Now, one of the most common ways to finance a home is through a mortgage, but since you are a foreign national in a foreign land, of course, the rules of application won’t be the same. Take United States for example – mortgage rates in the United States are relatively low and the application process is quite easy, but if you are a foreign national seeking to finance a property in the country, and don’t have a credit history in America, the requirements change a bit. In this article, we will tell you more about U.S. mortgages for foreigners, and how you can apply for one.

Can I get a mortgage in the U.S as a foreigner?

The answer is yes, you can. There are lenders in the U.S. who provide mortgage solutions to foreign nationals with no credit history in America, which they do at very competitive rates. Whether you are a U.S. newcomer on a visa or a Non-resident buyer of properties in the United States, you are covered. In the past, foreign nationals used to finance their properties in the U.S. by cash, or they had to wait for a minimum of 2 years to establish a credit history within the country to obtain a mortgage. Obviously, a lot of people opted for all-cash purchases. However, this has since changed as there are now mortgage programs that target foreign nationals with no credit history.

How can you obtain such a mortgage?

If you don’t have a credit history in the U.S., here is a step by step process on how you can apply for a mortgage:

Step one – make an estimation on the amount that you need – now, as a foreign national obtaining home financing in America, the very first thing you need to consider is the maximum amount you can afford to pay per month towards the loan, rather than the price of the home. Mortgage lenders in the U.S. use two main methods to count your monthly payments, which are the front-end and the back-end. The front-end takes into account all the housing costs including taxes, while the back-end excludes the additional fees. So, when considering the amount that you need, take this into account.

Step two – obtain a mortgage pre-approval – as we’ve already mentioned, there are some U.S. lenders who specialize in foreign national mortgage loans, and for them to assess your creditworthiness, they consider non-traditional data points to assess your credit risk. This includes assessing your credit history in your home country. Once the lender is satisfied, you will obtain a pre-approval for a mortgage, which will give you confidence and knowledge of how much you will get from the lender.

Step three – prepare your documents – for you to get a mortgage as a foreign national, you will need to verify these three things; first, your identity; second, your income statements that prove to the lender that you can make payments; and thirdly, any assets that would help with the down payment costs. In addition, the following documents will also be needed:

  • A copy of your passport
  • A valid U.S. visa (only those from countries that participate in the Visa Waiver Program are exempted).
  • An international credit report (ICR) – this reports compiles past financial information outside the United States, such as the credit history in your home country or any other country where you have a financial history, property ownership, public record, property tax, as well as employment and residency verification. 

Step four – find a suitable home – once you have been approved for a mortgage, you can now go house hunting. Since you are in a foreign country, maybe start by getting a good agent to help you with the search. With an expansive knowledge about the local market, he/she will help you find the perfect property for you. And after you find one that you want, the agent will help you formalize a proper offer.

Step five – once the offer is set, it’s time now to begin the mortgage application process, where you will finalize the terms of the loan. You will need to consider the type of the mortgage, the respective rates, the amount to be paid monthly, and lastly, the term length. Be sure to provide all the documents requested in the pre-approval stage. You will be given a loan estimate which you can accept or reject. If you accept it, be sure to lock the interest rate to ensure that it remains the same regardless of fluctuations in the bond market.

Step six – lastly, the loan processor will then prepare all the documentation needed which will be submitted to the underwriter who will then assess whether you do qualify for the loan under the terms presented. He/she will also verify everything you’ve provided and might ask for more documentation if needed. Once everything is set and the lender is satisfied that you deserve the loan, the mortgage will be processed and will be availed to you to finance your property.  

Is there any benefit to getting a mortgage in the U.S. as a foreigner?

The real estate market in the U.S. is one of the most sought-after in the world, and with that, applying for a mortgage is worth it. Here are some other benefits:

  • As opposed to paying cash, getting a mortgage gives you the ability to purchase a much better home than you would typically pay for in cash.
  • There are potential tax benefits, which you can take advantage of.
  • The cash saved can be used to finance other investments in the country.
  • The financial risks are greatly reduced as you would have eliminated the cash aspect, which always tends to cause problems.