Foreign Real Estate Buyers: Why Are They Mostly Cash Buyers?
Flow of foreign money to United States real estate market is increasing. International buyers contributed to cash buying group, purchased homes here for a worth of $92 billion in the last twelve months. That is 35% plus increase when you compare to last year numbers.
Most foreign buyers of real estate here in the United States are cash buyers due to the fact that it is difficult to get mortgage for them. Because they have no credit history here and as a result they cannot qualify for mortgage loan. Good credit score has become a necessity in the US for moving forward in all aspects of one’s life.
Banks here require a non-US buyer to make a higher down payment, sometimes 40% or so depending on the bank policy and the control they want on the customer. On top of that, many banks are not interested getting involved in financing to foreign nationals- one reason again is that they don’t have a verifiable credit score in the United States.
The bank’s hesitation to provide loans to foreign buyers are legitimate in most cases because with the exception of a small group of buyers, the other buyers are not able to provide needed documentations supporting their claims such as income for the last two years, passport or Identification documents, credit reports from US credit bureaus, proof of assets for down payment, source of funds, mortgage application fraud, tax identification number issued by IRS. etc.
Things are changing though for good!! The best news is that mortgage availability to foreign buyers are getting better. Mortgage for foreign buyers are available now in all 50 states. That doesn’t mean mortgage guidelines are laxed; they are strict and I believe that is the way it should be. Banks no longer can afford to make bad, subprime loans.
Banks are now getting into it by offering programs especially for foreign buyers. Once you start looking into it you will find that foreign buyers are able to finance their real estate deal by getting around 75% of the purchase price and you can be qualified for up to a million dollars loan if you have all your ducks in a row, organized and prepared.
This change is good because this will allow the buyers to take advantage of ‘Leverage principle’ which provides them with better return-on-investment. Therefore, plan ahead and be prepared for getting mortgage approved by having adequate funds for closing, proof of source of funds for closing costs, other supporting documents such as credit references from banks or similar institutions, passport or visa, proof of employment and all other requirements from your preferred mortgage lender.
In all cases, especially in international real estate transactions, make sure to work with professionals who have the knowledge, experience and integrity in their dealings. They will help you and guide you through all the stages of obtaining loan.
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