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Foreign National Loans Are Making a Comeback

October 5, 2016

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The U.S. is experiencing a boom in foreign national loans.

More and more overseas buyers are shelling out cash for real estate in the U.S. In the past year, 50 percent of foreign homebuyers paid cash for their investments, according to the National Association of Realtors. But a strong market value of the U.S. dollar and rising home prices have blocked some buyers from purchasing homes outright, which means they need to look for other financing options, The Real Deal explained. Strong interest in the American real estate market from foreign buyers has been a large contributor to inflated home prices, National Mortgage News reported.

“Applicants must make as much as a 30 percent down payment.”

Many foreign buyers flock to nonconforming loans – which are different from conventional loans and jumbo mortgages – because they allow them to buy more expensive homes than they could through traditional means. But this comes at a price. Applicants must make as much as a 30 percent down payment on loans up to $1 million, and even more for bigger loans, The Wall Street Journal reported.

“Most [overseas buyers] don’t think they can get a loan, so they pay cash,” Chris Furie, a partner at Insignia Mortgage, told The Wall Street Journal. “But they’d much rather take a loan, even if they have to put down 40 percent. It allows them to afford something a little more expensive.”

The process for foreign purchasers scooping up property in the U.S. is more in-depth and intensive than for Americans filing mortgage applications. Since many foreign homebuyers don’t have a U.S. credit score, loan applicants must submit tax returns or bank statements from their home country, according to The Wall Street Journal.

The mortgage application process in the U.S. is much different from the regulations in other countries, so foreign buyers should be prepared for a longer application process than U.S. would face. It can take up to a month to close on a U.S. loan, compared to as little as one week in countries such as Canada, according to The Wall Street Journal.

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