When your heart beats faster for a newfound property and you really want to buy it, the question that always comes up is, “how can I afford it?” The best this is to talk to a Mortgage Broker, even before starting to search for a property. After a short conversation over the phone, the broker will ask for a few documents to ensure that you have the ability pay the monthly installments and will prepare a Pre-Qualification Letter, determining the total amount of the house you can purchase.
The financing process is not complicated. What is difficult is understand why the bank is asking for so many documents, why is everyone so rushed during the process, and not to know the costs involved. So, here is a simplified version of this process, a generalized list of what most banks will ask, and an explanation of what consists the financing of a property for foreigners.
Only a few banks have the experience and competence to provide quick financing for national foreigners. A person that does not live in the United States can have a local bank account, make demand deposits and international transfers, but to ask for a mortgage, that is a different issue, because there is no credit history in the US. It is necessary to prove the origin of the funds, as well as the ability to continue making payments, even if the property is being used as a collateral for the loan. Banks would require that foreign nationals make a down payment of at least 30-35% and the finance amount be higher than US $100 thousand.
Each bank will request different documents, but essentially, it is important to provide them fast to meet the purchase contract deadline. Here is a list of documents needed:
- Bank Application
- Passport copy and valid visa
- Proof of income
- Income taxes from the last 2-3 years
- Bank and credit references
- Property purchase contract
- Business card and company website
A mortgage consists of a series of equal payments over a period of time to cover the purchase cost of a property. These payments include the principal (part of the value of the property divided by the number of payments) and the interest. Currently, the interest rates for US residents are an average of 3.75% a year. For foreign nationals, these interest rates are about 3.875 – 5% a year today, in August of 2015, for an ARM, with 3 year ballon payment. There is no penalty for paying these mortgages early, and they are typically amortized (paid over) a period of 30 years or less. It is always best to check with a mortgage broker or your bank for the most current rates.
There are two major costs in the purchase of a property, the costs of financing, and the closing costs. The financing costs include an evaluation of the property, to see if it conforms to the amount of the loan. There are also the application fees, credit verification, and other costs, that could total 4-6% of the value of the loan. The bank can typically offer a document called “Good Faith Estimate,” or GFE, during the process that should be very close to the final value.
See how easy it is?
Now you can call me and search for your next property.
And buy with confidence.