Question: Having read your column on Realty Times I was encouraged to write and appeal to your no nonsense wisdom. My father passed away a year ago and left his three sons (including me) a rental property in the U.S. My brothers are not interested in holding the property and I have offered to buy them out. The property is owned free and clear and generates about $2,000 per month in rent. I have enough money to purchase my brothers' interest in cash but would prefer to put a mortgage on the property. What is the process for a non-resident (foreigner) to obtain a mortgage? Do I need to own assets and bank accounts in the U.S.? (I currently have a stock and bond portfolio in the U.S.) Can I qualify for a mortgage based on the income generated from the monthly rent? Any advice would be very helpful.

Answer: Thanks for writing. It's nice to see that folks from all over the world are reading Realty Times. Unfortunately, the bottom line is that you will probably not be able to qualify for a typical residential mortgage but you have other alternatives. Allow me to summarize the general guidelines.

Most mortgage loans in the U.S. are funded by various lenders and then sold and packaged together to be converted into mortgage-backed securities by Wall Street firms or the well known mortgage giants, Fannie Mae and Freddie Mac. This process ensures a steady replenishment of funds to make new loans and provides opportunities for investors seeking out a relatively safe return on their money.

Lenders who sell their loans on the secondary market must warrant that each loan adheres to certain guidelines. For example, one lender might warrant that all loans are less than 95 percent of the value of the collateral (property). Or perhaps the lender warrants that all borrowers have clean credit history.

These are off the top of my head but the point is that in order for mortgage backed securities to remain a good investment for individual and institutional investors, the assets must carry a low risk. And a mortgagor who happens to be a non-resident alien living outside the U.S. is deemed to be a high risk. Even if the loan you're seeking is far less than the value of the property, lenders will not accept your application because foreclosure proceedings would be difficult.

However, loans are often granted to non-resident aliens who are in the U.S. with an acceptable work visa. Typically the applicant must be established in the U.S. for some time and the visa cannot allow diplomatic immunity. Employees of the World Bank in Washington, D.C. are good examples of eligible foreign nationals.

Okay, now let me make some suggestions. As I said, most lenders won't make a loan to a non-resident alien. But there is a large mortgage market for folks who don't meet the standard guidelines. These "alternative credit" lenders have more flexible guidelines and will often grant credit to non-resident aliens.

So to answer your question -- yes, you should be able to find a loan but expect to pay a significantly higher interest rate to compensate for the higher perceived risk. Check around with some trusted sources you may have in the U.S.

Let me throw out a couple more suggestions. Inquire about a mortgage with the financial institution that is holding your stock and bond portfolio in the U.S. Perhaps they will grant you a secured loan. Another suggestion is to look within your own country. If you own your own home, perhaps a local bank will give you a home equity loan secured against your house. You can use the proceeds to buy your brothers' share of the U.S. property. Good luck.

Published: September 11, 2003

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