For foreign real estate investors, a foreign national loan Texas is the primary financing tool to access lucrative opportunities in the Lone Star State. Texas is one of the most active real estate markets in the United States, with the state capital, Austin, tied with Kansas City as the hottest market of 2024.
Defy Mortgage caters to non-traditional borrowers, such as entrepreneurs, self-employed individuals, and foreign nationals. With over 75 fully customizable mortgage solutions like bank statement loans and P&L loans, we have helped scores of borrowers reach their financial goals. If you’re a global investor searching for a foreign national loan in Texas, our competitive rates and simplified processes can help you manage your investments seamlessly and maximize your returns.
Drawing from our extensive experience, we’ve put together this blog to inform you on everything you need to know about foreign national loans in Texas. We’ll go over the requirements you need to qualify and the most important benefits that make foreign national loans advantageous to investors outside the US. We’ll also discuss some best practices to find the right lender for you.
Let’s jump right in.
Eligibility Requirements for Foreign National Loan Texas
A foreign national loan Texas gives non-US citizens who lack a Social Security number or credit score access to funding for investment in Texas real estate. To qualify, borrowers need proof of residency and financial stability, reputable references, and sufficient funds for the down payment.
Proof of Residence
In addition to valid ID, lenders look for proof of temporary residency status, such as a temporary visitor visa, business visa, or proof of any other non-immigrant status. Green card holders or other permanent residents typically cannot be approved for loan programs intended for foreign nationals. Borrowers typically also need to provide utility bills or other documents showing their primary residence in their country of origin.
Financial Information
Since different countries have different ways of measuring credit, foreign national lenders accept various financial documents to prove creditworthiness. Commonly accepted financial documents include financial statements and credit reports from your home country if it has its credit score system.
Financial statements typically have to prove liquid asset reserves, income, and spending to verify whether you can meet your monthly mortgage payments. Many lenders also require that they come from an accounting or auditing firm that isn’t affiliated with the borrower to ensure impartiality. Note that only regular income from salaries or business revenue is counted as income — gift funds don’t count toward your capability to service the debt.
References
Many lenders also require that borrowers provide reputable references, preferably from a financial institution, that can verify the borrower’s financial stability and a good relationship between them and the borrower. Reference letters from clients or employers can also reinforce your loan application.
A banking history of at least 24 months with the financial institution you used as your reference is ideal. Some lenders may also ask you to open an account with a US bank to store several months’ mortgage payments, with auto payment enabled to allow prompt payment.
Down Payment Requirements
Since lenders perceive foreign national loans as higher risk, down payment requirements are generally between 20% and 30% of the property’s value. This contrasts conventional loans available to US citizens, typically only needing 20% down. However, the down payment can be higher or lower depending on the borrower’s financials.
The high down payment ensures security for the lender and reflects the heightened risk of lending to non-residents.
Key Benefits of Foreign National Loans for Texas Properties
Foreign national loans in Texas offer several advantages for non-residents interested in Texas real estate. Here are some of the most important ones:
No U.S. Credentials Required
The primary advantage of foreign national loans in Texas is that they don’t require the borrower to have an established US FICO score, Social Security number, or permanent resident status. Borrowers don’t have to spend time building up these credentials, meaning they can more readily access the Texas real estate market and benefit from rising appreciation values and high rental income as soon as possible.
Instead of traditional documentation requirements, lenders accept a wide range of alternative documentation. This includes proof of income, bank statements from your home country, and letters of recommendation from reputable companies in your home country. However, if your country uses a credit score system similar to the US, you may need to provide a credit report from your home country.
Access to the Growing Texas Market
Texas’s expanding real estate market offers foreign investors lucrative investment opportunities and potential long-term returns. Real estate prices are on an upward trend, so while this does raise the price of entry somewhat, capitalizing on this early lets you maximize how much equity you can build up.
Texas also has one of the fastest–growing populations among US states, being the most moved-to state in 2023 and the second most populous state after California. As the only other state home to over 30 million people, you’ll be hard-pressed to find any place in Texas without strong rental demand.
Flexible Loan Terms
Foreign national loans often have flexible terms, such as short—and long-term financing options, adjustable-rate mortgages (ARMs), and customizable payment structures like interest-only options to maximize cash flow during the first few years of the loan’s life. Many lenders also provide loan options to foreign nationals to accommodate various financial goals, from debt service coverage (DSCR) loans to refinancing mortgages like home equity loans.
Government-Backed Mortgages
Foreign national borrowers can also access 30-year fixed-rate conforming loans backed by US government entities like Fannie Mae and Freddie Mac. This decreases the risk that lenders have to take on, allowing them to offer lower interest rates.
Tax Credit Eligibility
Foreign nationals can obtain many of the same tax credits as US citizens for certain property developments. In Texas, foreign investors can gain additional tax deductions from the Texas Department of Housing and Community Affairs (TDHCA), which administers tax credits to property owners who allocate a certain percentage of their rental property to affordable housing.
In addition, nonresident foreign nationals are exempt from taxes on capital gains, which is a big plus for foreign investors who intend to fix and flip or otherwise resell their investment properties. Foreign nationals can also claim tax deductions from depreciation, mitigating losses from bad investments.
Tips for Finding the Right Lender and Navigating the Loan Process
Finding the right lender can simplify obtaining a foreign national mortgage in Texas. Consider these tips to streamline your experience:
- Seek Lenders Specializing in Foreign National Loans: Working with lenders experienced in foreign national loans can provide access to more tailored loan options and expertise.
- Focus on Lenders With Real Estate Experience: Lenders who have substantial experience in real estate financing, especially with foreign national clients, are often better at understanding the unique needs and challenges of non-U.S. borrowers.
- Consult Real Estate and Financial Advisors: Advisors familiar with cross-border transactions can guide you through regulatory requirements and financial planning. This can help you form informed investment strategies that align with current Texas real estate market conditions.
- Thoroughly Understand Loan Terms: Since loan terms, interest rates, and additional fees can vary widely, review all conditions carefully to avoid surprises. You can always ask your lender about specific policies and seek a second opinion from a financial advisor or real estate attorney experienced in foreign national transactions. If you’re signing with co-borrowers, ensure all involved parties fully understand the loan terms.
Of these, finding lenders versed in providing foreign national loans and the real estate market of Texas is the top priority. Defy’s mortgage experts have years of experience administering foreign national loans and working with property investors and homebuyers in Texas. We’re deeply familiar with the workings of Texas real estate and the needs of foreign investors, as well as how to craft custom lending solutions that tie both together.
Foreign National Loan Texas FAQ
Can foreign nationals get a mortgage loan in Texas without a U.S. credit history?
Yes, foreign national mortgage loans are designed to accommodate borrowers without a U.S. credit history. However, you may need to provide more extensive documentation of your finances to qualify. This often includes proof of employment and cash reserves, employment or business history, and references from foreign financial institutions.
What kind of down payment is required for a foreign national loan in Texas?
Typically, foreign national loans require a down payment between 20 and 30 percent due to the perceived risk.
Are interest rates higher for foreign national loans compared to U.S. resident loans?
Interest rates for foreign national loans can be slightly higher to offset the added risk. Typically, you can expect a foreign national loan to have around 1% higher interest rates than a conventional mortgage in the US.
Do I need a Social Security number to apply for a foreign national loan in Texas?
No, having a US Social Security number is not one of the foreign national loan requirements. This and not needing a US credit score are the two chief things that make foreign national loans accessible to non-residents.
Key Takeaway
A foreign national loan Texas can be the most practical way for non-US citizens to invest in one of the country’s most thriving real estate markets without spending years building up US financial credentials. With a wide range of accepted credentials, virtually anyone with sufficient income and creditworthiness, even newcomers to property investment, can qualify.
Foreign investors can establish a successful real estate foothold in Texas by choosing the right lender, understanding the necessary documentation, and fulfilling down payment requirements. And given that Texas is the fastest-growing state in the United States, that foothold can expand into a flourishing portfolio in no time.
Would you like to start your investment journey with a foreign national loan in Texas? Start a conversation with Defy and let us discuss your options with you. Let’s talk about loan terms and property types tailored to your goals.
