The Mortgage Go To Guy!!

The US Mortgage “Meltdown” has dealt a rough blow to Foreign National Buyers who are trying to take advantage of the weakness of the US Dollar and invest in property in vacation and resort areas like here in Florida.

Lenders have long seen Foreign Nationals as risky, but still offered 80-90% Loan to Value programs for their properties in the US.  Unfortunately, some investors will not be able to afford to buy properties in the US, unless they think strategically.

In today’s mortgage market, gone is the ability of Foreign National buyers to negotiate with different lenders over multiple loan programs.  There are only a few lenders left that will lend to Foreign Nationals and some only offer one or two different loan programs.

Currently, there is only one lender who will lend to Foreign Nationals with low documentation requirements.  Follow this link to see what most lenders require of Foreign Nationals -o-> Florida Mortgage | Foreign National Homebuyers: How to get your Loan Started!

This particular lender only requires a valid passport to buy.  Unfortunately, they only lend 70-75% of the value of the property.  To get to 80%, which is not always possible, a Foreign National borrower will need to be ready with all the documentation listed in the article previously linked to in the preceding paragraph.

On the other hand, 70-75% loan to value is a better range for the investor as it ensures cash flows.

Whether you are buying a property, a lender will have a difficult time making the deal if the property loses money in rent every month.  When loan values are higher, so are rates and so are mortgage payments.  If your mortgage payments plus insurance, taxes and homeowners association dues are more than the rent will cover, then the property is showing “Negative Cash Flow“.  Lenders will at least require that the property breakeven.

Negative Cash Flow hurts the value of the property to an investor no matter what the entry and exit strategy is.  Even if an investor’s goal is to buy and hold the property for capital appreciation, Negative Cash Flows decrease the long term appreciation.

Lenders are also hedging their risk in lending to Foreign Nationals by offering much lower rates on shorter term loans. 

It is not likely that a Foreign National will hold a property for 30 years, therefore the lenders have higher rates on that program type. 

Typically, the best rates for Foreign Nationals are on 3 year Adjustable Rate Mortgages.  While some people recoil from just the notion of an ARM, they really are good tools for investors.

One lender still offers a “Pick a Pay” type loan.  The benefit of it is that the Interest Only payment is fixed for 3 years and is a lower rate than many conventional 3 year ARM payments. 

This means that if you are a foreign national investor looking for a property in the US, it will be easier to rent out the property and cover the mortgage including taxes, insurance and homeowners association… or even make a few dollars a month.

Now, what if you cannot afford 30% down? perhaps a syndicate of a few borrowers pooling funds together will be a smart tactic.  Even try for a larger property or a commercial property!

More Real Estate Industry News You Can Use from
David A. Podgursky, MBA
The Mortgage Go To Guy!
Your Source for Residential and Commercial Mortgage Loans in Florida

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