As the most diverse state in the U.S., California’s real estate market is a hot spot for foreign buyers. Between April 2022 and March 2023, foreign buyers purchased $53.3 billion in U.S. residential properties, totaling 84,600 homes and accounting for 2.3% of the $2.3 trillion in existing-home sales. With the U.S. foreign-born population at an all time high of 47.8 million in 2023, the demand for specialized foreign national loans will only continue to increase.
If you’re a non-U.S. citizen who has always had a dream of owning property in the Golden State, but aren’t able to qualify for traditional loans, foreign national loans California could be just the solution you’ve been looking for. Our guide explains how these specialized financing options help international buyers achieve their homeownership goals.
What Is a Foreign National Mortgage Loan?
A foreign national mortgage loan is a type of real estate financing that’s designed specifically for non-U.S. citizens looking to buy a property in the United States. Non-U.S. citizens often face many challenges when trying to qualify for traditional loans like lack of U.S. income documentation or U.S. credit history.
These loans are typically classified as non-QM (non-qualified mortgage) loans, meaning they don’t meet the strict income verification standards set by the Consumer Financial Protection Bureau (CFPB). This allows non-QM lenders to evaluate your qualifications using alternative methods, like checking your foreign credit or bank statements, making them a great fit for many foreign nationals. With flexible qualification requirements, foreign national loans provide a pathway for international buyers to invest in U.S. real estate without the standard documentation required for traditional loans.
Foreign National Loans vs. Conventional Loans
The main differences between foreign national loans and conventional loans are who these loans are intended for and the qualification requirements for each.
As we looked at in the previous section, foreign national loans are for non-U.S. citizens who have limited U.S. income or credit history. Without this documentation, it can make it very difficult for foreign nationals to qualify for a home loan. Foreign national loans often look at your foreign financial documentation as a way to verify your creditworthiness and proof of income, bypassing any traditional U.S. documentation requirements. One thing to keep in mind is that foreign national loans tend to have slightly higher down payment requirements and interest rates in comparison to conventional loans since lenders take on a little more risk with these loans.
On the other hand, conventional loans require a solid credit score with sometimes years of steady income history. These loans were designed for U.S. citizens or permanent residents that can provide this documentation. Conventional loans are the most common type of mortgage used to purchase homes in the U.S. and they have down payments as low as 3-5% with competitive interest rates. However, most conventional loans don’t allow foreign nationals to qualify, making it harder to buy a home without a specialized loan.
Why Use Foreign National Loans California for Your Next U.S. Property Purchase
If you’re a non-U.S. citizen looking to buy a property, California’s real estate market offers promising returns for both homeowners and investors – and foreign national loans California can make this goal possible!
For those dreaming of homeownership, the home values in California continue to rise, with an average home value of $773,239, reflecting a 4.3% increase over the past year. Reap the benefits of potential capital appreciation while living in sunny California.
For those interested in buying investment properties, California’s strong rental market has an average rent for a one-bedroom apartment at $2,151 and a low rental vacancy rate of 4.4% in 2024. Not to mention that California saw an increase of 67,000 residents in 2023, keeping the housing demand high.
Pros and Cons of Foreign National Loans California
Pros:
- Accessible real estate financing for non-U.S. citizens
- No U.S. credit history required
- No Social Security Number (SSN) required
- Alternative income verification
- High demand for housing in California
- Flexible loan options
Cons:
- Higher interest rate and down payments
- Limited loan availability
- Currency exchange risk
What’s Required to Qualify for a Foreign National Loan?
Foreign national loan qualification requirements vary by lender, but you’ll generally need:
- Proof of income
- Proof of stable work history with a minimum of two years of employment
- Proof of assets (stocks, savings accounts, checking, etc.)
- Liquid cash reserves to cover closing costs and several months of mortgage payments
- Down payment of 20-30% of the purchase price
- Proof of residency (two years’ history of residency – rent/own, address, and dates)
- A copy of your passport and visa (if applicable)
- A US credit report (if you have one), International Credit Report, or a credit report from your home country
Down Payment Requirements for Foreign National Loans California
The exact down payment amount you’ll need for foreign national loans California depends on the lender and your credit score. Most foreign national loans require a down payment of 20-30%. The higher down payment requirement is often needed to compensate for the limited U.S.-based financial history.
Interest Rates for Foreign National Loans California
Interest rates for foreign national loans California vary depending on the lender, your credit score, your down payment, and the current market rates. You can generally expect foreign national loan interest rates to be slightly higher than conventional rates because of the added risk for lenders. On top of that, keep in mind that some lenders may also consider currency exchange risk when setting rates.
Foreign National Loan Lenders in California
When shopping for a foreign national loan lender, you should find one that understands the unique needs of international buyers and offers flexibility in documentation and terms. Look for lenders experienced in working with non-U.S. citizens since they’ll have more experience with accepting alternative credit references, foreign bank statements, and proof of income. Beyond experience, comparing interest rates, down payment requirements, and fees from multiple lenders is key to finding the best financing solution.
If you’re looking to get a foreign national loan, consider us at Defy Mortgage. We specialize in innovative loan options that don’t rely on rigid, cookie-cutter criteria for the non-traditional borrower. Schedule a call with one of our mortgage experts today to see how we can elevate your next home buying experience.
Alternatives to Foreign National Loans California
For non-U.S. citizens who don’t qualify for foreign national loans California, an ITIN loan can be a great alternative. ITIN (Individual Taxpayer Identification Number) loans are designed for borrowers who don’t have a Social Security Number (SSN) but have an ITIN for tax purposes. This allows them to access mortgage financing even without U.S. citizenship or a traditional credit history.
Foreign National Loans California FAQs:
- What are foreign national loans?
Foreign national loans are specialized mortgages available to non-U.S. citizens who want to purchase property in the United States. These loans typically require alternative documentation since they’re designed for those without U.S. credit histories or Social Security Numbers (SSNs).
- Who can qualify for foreign national loans California?
Generally, non-U.S. citizens without a green card or U.S. residency but with enough foreign income and assets can qualify. Lenders typically look for stable foreign bank statements, credit, and property equity.
- Do I need a U.S. credit history to apply for a foreign national loan?
No, a U.S. credit history is not required to apply for a foreign national loan. Lenders often use foreign credit reports or bank statements to review your eligibility instead.
- What types of properties can I purchase using foreign national loans California?
Foreign national loans can be used to purchase residential properties, such as single-family homes, condos, and multi-family investment properties. Depending on the lender, some may also offer options for vacation homes and certain commercial properties.
- Can I get a foreign national loan with no U.S. income or tax history?
Yes! Foreign national loans are specifically designed for borrowers without U.S. income or tax history. Lenders rely on foreign income documentation and other assets to assess your eligibility.
- How are interest rates determined for foreign national loans California?
Interest rates for foreign national loans are generally higher due to increased risk for the lender, and they’re affected by factors like loan amount, down payment size, and your financial stability. Some lenders may also consider currency exchange risks when setting rates.
- What is the typical down payment requirement for foreign national loans?
Depending on the lender and your credit score, you can expect to put down anywhere between 20-30% of the property’s purchase price.
- How long does the process take to secure foreign national loans California?
The process to secure a foreign national loan can take 30-60 days, sometimes longer because of additional documentation and verification requirements. Working with a lender experienced in foreign national loans, like Defy, can help speed up this timeline. Book a call with us for a free consultation on how we can help on your next U.S. property journey.
