Financing a property purchase – primary residences, second homes, and investment properties – in the US is common: it reduces the equity requirement for the transaction and mortgage interest is tax-deductible. Since the US-mortgage crisis 2006-08, the loan process has become a bit more regulated and lengthy. Note: Financing a business purchase can be challenging for US citizens, and is extremely difficult if not impossible for foreign nationals.
For residential deals, typical Loan-to-Value Ratios (LTV) are 70% – 95% for US-citizens and 50% – 75% for foreign nationals (non-US-applicants), depending on credit history, documentation and income. 100% financing is mostly unheard of in the US.
To qualify for a mortgage, some lenders require that the borrower opens an account with the bank as an additional security or pledges liquid assets (cash-equivalents, commonly traded stocks).
Loan amounts can go as high as $25m for foreign nationals, and considerably higher for US citizens. Loan rates for foreigners are always higher than for US citizens or permanent residents. It pays to comparison-shop – not only because rates vary, but also as some mortgage brokers specialized in foreign nationals extract a substantial rate surcharge for the privilege of doing business, especially if they are located in the borrowers' country of origin and speak their language.
If you happen to be a non-US citizen, make sure your lender is experienced in dealing with foreign nationals, or ask your agent to recommend one. For both US- and non-US-citizens, prudent lender selection will streamline the process considerably.
Time frame: as of late 2022, typical loan approvals for US borrowers take at least three, more likely four to seven weeks, often longer for foreign nationals. For those, a FICO score is mostly not required, and often neither an ITIN, social security number, green card or visa.
Like loan rates, the exact requirements to get a mortgage vary from lender to lender, but for both US- and non-US applicants, thorough and detailed documentation wins the day.
Tobias Kaiser works as an independent real estate broker and consultant in Florida since 1990. Always putting his clients' interest first, he specialises in modern Florida homes and architecture, as well as net leased investments.