Financing for a Foreign National

Member since 2024 · 15 posts · 15 votes

Hello! My partner is an EU citizen looking to invest in the USA to purchase properties that will later be for Section 8 tenants. He does have an ITIN number, recently opened up an Amex card in the States to start building credit history, and has an LLC and a US address. I am a US citizen with no credit history in the USA; just have an address in the USA. We are looking to purchase 5-10 properties at least, in the next 6-12 months. Thus, we want to find a reliable vendor who works with foreign nationals or US citizens with almost no credit history. We are not looking to pay 35% of downpayment. The less downpayment - the better. Overall, looking to find creative approaches to our situation. Any recommendations would be greatly appreciated!

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Stacy RaskinBusiness Member

Lender · Member since 2022 · 1k+ posts · 522 votes

There are lenders that will do 25% down for a single family rental and 30% down for 2-4 units for foreign nationals. This requires an unexpired passport and bank statements showing down payments and closing costs which would need to be translated and in U.S. Dollars. This would be structured as a DSCR loan. More info on DSCR loans:

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.

Some lenders assign foreign nationals assign a 680 credit score for pricing and the loan.

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Happy to discuss further.

[email protected]818-770-0340

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
2y
Hey Anna,
Unfortunately without any credit history here in the US, most DSCR lenders are capped at 70-75% of the initial purchase price. You may also be required to show credit history in your country of origin for favorable terms/higher than 65% LTV. Lenders will want to see 2 active open trade-lines for the past 24 months with on time monthly payments or a credit reference letter from a creditor.
I would advise to work on building your US credit to get a higher LTV and better terms.
[email protected]818-269-7983
LuxePrivate Investments LLC 570 Reviews
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Derek BrickleyBusiness Member
Lender · Ann Arbor, MI · Member since 2021 · 686 posts · 232 votes
2y
Hi Anna!
Generally with foreign nationals, if there is little to no credit history there are ways to use alternative tradelines. Seems like a pretty standard situation there. Especially if you have a US address and there is a US LLC, but either way an investor loan (Debt-Service) would be typical depending on a bit more details. Where are you looking to invest? Are you looking for rehabs or turn key? What price range would you be looking for?
[email protected]734-645-7722
Gold Star Mortgage Financial Group547 Reviews
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Brandon Croucier
Lender · Lake Havasu City, AZ · Member since 2024 · 700 posts · 285 votes
2y
Let's connect and discuss your options, theres a few ways to get some better leverage as a foreign national.
0 Reply
Jack KrusinskiBusiness Member
Realtor · Cleveland/Akron OH · Member since 2019 · 147 posts · 93 votes
2y
Hi Anna, I just sent you a lender that I use and recommend. I am NOT a lender, so I do not know all the ins and outs, but the gentleman I sent you does. I would recommend reaching out to him to see what options you have. If you ever need any deals sourcing, I would be happy to help.
[email protected]216-789-6736
0 Reply
Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 522 votes
2y
There are lenders that will do 25% down for a single family rental and 30% down for 2-4 units for foreign nationals. This requires an unexpired passport and bank statements showing down payments and closing costs which would need to be translated and in U.S. Dollars. This would be structured as a DSCR loan. More info on DSCR loans:

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.
Some lenders assign foreign nationals assign a 680 credit score for pricing and the loan.
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.

4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.

I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350, Insurance = $100, Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250, Insurance = $100, Association Dues = $25

Total PITIA = $1875 Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.

DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to discuss further.

[email protected]818-770-0340
Bright Skyline518 Reviews
Website View Page
1 Reply
Tracy Tippett
Financial Advisor · Port St. Lucie · Member since 2020 · 44 posts · 15 votes
2y
Several potential sources for foreign national lending. It always depends on the property and/or the principals. Avoiding a 35% down is going to require a very profitable deal or cash flow on the property. Does your partner currently have any US holdings?
0 Reply
Ko KashiwagiPro Member
Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
2y
Hi Anna,
If you're looking for the best rates & terms, it's best for you to build credit history and be the guarantor. Alternatively, there are programs that will allow borrowers to qualify high LTV with either a US Credit score or ITIN. Otherwise, a regular foreign national program can be used, which are typically capped with 5-15% lower LTV.
310-848-9776
0 Reply
Anna Doumkina
OP
Member since 2024 · 15 posts · 15 votes
2y
Quote from @Alex Hunt:

Happy to go over some options for both foreign national & “no credit” investors!

Hey Alex! Would you please message me directly to discuss this further? Thank you!
0 Reply
Givo Aghasi
Lender · Los Angeles, CA · Member since 2022 · 238 posts · 73 votes
2y
Happy to go through several possibilities for foreign nationals and "no credit" investors!
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