Hello, and thank you for joining me. My name is Fernando Zoota and I am your host for the podcast and blog, Non-QM Insider, the show where we talk about regulations, guidelines, and anything having to do with non-qualified mortgages. Today we will be discussing loans for foreign nationals. Let’s get into it.
What is the definition of a foreign national as it pertains to financing residential real estate, specifically non-QM? A foreign national is someone who lives and works abroad. They visit the United States occasionally for either business or pleasure. Without going into detail, due to regulations, a foreign national can purchase a second home or an investment property, but never a primary residence. Post-COVID many lenders have limited their programs to the purchase of investment properties only.
Here’s an example:
Juan Acosta is a successful businessman in Mexico. He would like to diversify his investment portfolio. He has decided to purchase a rental property in Texas. If successful he may purchase additional rental properties.
I like these loans because you’re looking at less information. You’re not evaluating income because it’s earned outside of the country. Essentially, there’s no “reasonably reliable third party” income documentation for a lender to review. Additionally, you’re not reviewing credit because other countries don’t employ a credit evaluation system as we have in the United States.
The flip side is that the minimum down payment will be high. A 35% down payment in this environment is not unreasonable.
A Foreign National is not…
So, the question I get most often, goes something like this;
“Do you have a foreign national loan program? The borrower has a social security number, but their green card has expired. They would like to buy a primary residence….”
From a lending perspective, this is not a foreign national because the borrower lives and works in the United States. Again, this is driven by regulations and the lender’s interpretation of those regulations. In this scenario, the borrower is typically a non-permanent resident alien whose temporary visa has expired.
A non-permanent resident alien is a non-United States citizen. These individuals are permitted to live in the United States on a temporary basis and may have been granted authorization to work in the United States. For example, a temporary student or work visa. Post-COVID, the opportunity to find a non-QM loan for a non-permanent resident alien is less likely.
Here’s another example;
“Do you offer foreign national loans? I have a borrower with an ITIN that would like to buy a home.”
This is not a foreign national because, again, the borrower lives and works in the United States. ITIN stands for Individual Taxpayer Identification Number. The Internal Revenue Service (IRS), created the ITIN for use by anyone who is not eligible to apply for a Social Security Number (SSN) but who receives taxable money. If you’re in the United States with no legal status but are earning income, you can pay taxes with an ITIN. The number starts with a 9 and looks similar to an SSN. In this example, you’ll need a non-QM lender that offer’s an ITIN loan program. Post-COVID, this is difficult to find. Some lenders do offer the program, but it’s like pulling teeth to get the loan funded.
What about a non-citizen with a social security number and a valid green card? That’s a permanent resident alien and from the lender’s perspective is treated as a United States citizen.
What do you think? If you agree or disagree, comment down below. If you’re a lender feel free to make a comment.