Foreign National Mortgage California [2023]: Handbook

 by Amresh Singh

·

Updated on July 25, 2023·
11 min read

Buying a house in a new country as a foreign national can be a significant financial decision. However, obtaining a mortgage in the U.S. without an established credit history may seem challenging. Fortunately, there are mortgage lenders in California who offer competitive rates and options specifically designed for foreign national borrowers.

In this blog post, we will delve into the landscape of international transactions in California real estate and guide you through the process of obtaining foreign national loans without a U.S. credit history. We’ll cover the following:

By understanding the available mortgage solutions and following the appropriate steps, foreign nationals can realize their dream of homeownership in California. Let’s explore the possibilities together!

Mortgage Options for Foreign Nationals in California

Mortgage options tailored for foreign nationals in California cater to individuals with no or limited U.S. credit history. With many newcomers waiting 2+ years to establish credit before purchasing a home, it is possible to get a US mortgage the moment you step in the US.

Despite the prevalence of cash purchases among non-resident buyers, only 56% of U.S. newcomers on non-immigrant visas opt for U.S. mortgages to finance their homes. This indicates a lack of awareness about the available mortgage options for foreign nationals in California without a U.S. credit history.

Foreign national mortgages allow newcomers and non-US residents to get a US mortgage with no/thin US credit history.

Documentation Required for Foreign National Mortgage California

When applying for a foreign national mortgage loan in California, specific documentation is essential. Borrowers will typically need to provide the following:

• Valid passport or visa indicating eligibility to be in the United States.
• Social Security Number (SSN) for those who possess it.
• Individual Tax Identification Number (ITIN) or other taxpayer identification documents.
• Bank statements or other financial records from both the home country and the United States to establish cash flow and assets.
• Employment verification and proof of income, such as pay stubs or employer statements.
• Credit report or other evidence of credit history, which can be from the home country or the United States.

Meeting these documentation requirements will help foreign national borrowers in California navigate the mortgage process and access suitable financing options tailored to their needs.

Eligibility Criteria for Foreign National Mortgage Loan California

Eligibility criteria for foreign national mortgages in California may vary depending on the lender and specific loan program. However, here are some standard requirements:

• Valid Visa or Residency Status: Foreign national borrowers typically need to have a valid/eligible visa or residency status in the United States. Lenders may have specific requirements regarding the type and duration of the visa.
• International Credit History: Since foreign national borrowers may not have a credit history in the U.S., lenders often consider their international credit history. This may involve providing documentation, such as credit reports and references from financial institutions in their home country.
• Down Payment: Foreign national borrowers may be required to make a higher down payment than U.S. citizens or permanent residents. The down payment requirement can vary but is often in the range of 20% to 25% of the property’s purchase price.
• Proof of Income and Assets: Lenders typically require foreign national borrowers to provide documentation of income and assets. This may include bank statements, tax returns, employment verification, and other financial documents.
• Reserves: Lenders may require foreign national borrowers to have certain reserves, typically expressed as several months’ worth of mortgage payments, in their bank accounts.
• Property Type and Use: The eligibility for foreign national mortgage loans may depend on the financed purchase property type. Lenders may have restrictions on specific property types, such as investment properties or non-owner-occupied properties.

It’s important for foreign national borrowers in California to work closely with lenders who specialize in providing mortgage loans to foreign nationals. These lenders will have expertise in understanding foreign borrowers’ unique needs and requirements and can guide them through the application process.

Find the Best US Lender for Foreigners

Get pre-qualified for an US Mortgage with No US credit

Steps to Qualify for a Foreign National Mortgage California

Step 1: Determine your budget by assessing how much home you can afford in California.

When determining your budget for a home in California as a foreign national, focus on your maximum monthly payment rather than the purchase price.

Consider components such as

• mortgage principal and interest,
• property taxes,
• homeowners insurance premiums, and
• Homeowner’s association dues (if applicable).

Calculate both the front-end ratio, which includes housing costs, and the back-end calculation, which excludes additional fees. This assessment helps you understand how much home you can afford while considering the specific financial circumstances of your California market.

To navigate the California real estate market effectively, consider exploring our guide on the “11 Best Places to Buy a House in California in 2023” for valuable insights and location recommendations.

Step 2: Finding a California Lender for Foreign National Mortgage Loans

The following things can be kept in mind while finding:

• Estimate Budget: Calculate how much you can borrow and afford for your California property purchase.
• Seek Lenders with Experience: Look for financial institutions offering foreign national mortgage loans in California.
• Research Lender Background: Check for lenders experienced in handling foreign national loan programs.
• Consider FDIC-Affiliated Lenders: Opt for lenders associated with FDIC banks for added security.

HomeAbroad is here to assist foreign nationals like you in connecting with trustworthy lenders who specialize in foreign national mortgage loans in California.

Find the Best US Lender for Foreigners

Get pre-qualified for an US Mortgage with No US credit

Step 3: Obtain pre-approval for a foreign national mortgage from lenders specializing in California.

In California, there are mortgage lenders who understand the unique needs of foreign nationals and offer specialized loan programs tailored to their circumstances. These lenders take into account non-traditional credit factors, including credit history from outside the US, to assess your creditworthiness.

By obtaining a pre-approval for a foreign national mortgage, you gain a clear understanding of the loan amount you qualify for before starting your property search. This demonstrates your commitment to buying a home and helps real estate agents and sellers take you more seriously.

Step 4: Prepare the required documents for your California foreign national mortgage.

• Provide proof of identity, such as a passport copy and SSN (or ITIN if you do not have one).
• Validate your U.S. visa unless eligible for the Visa Waiver Program.
• Complete the lender’s International Credit Report Form, if needed.
• Submit two years of employment history with contact details.
• Include two years of residency history, specifying addresses and ownership/rental information.

Understanding International Credit Report (ICR) in California:

• An ICR is a third-party report used by U.S. lenders to assess eligibility to offer foreign national mortgages.
• It compiles credit, property, tax, insurance, public records, and employment/residency information.
• Lenders typically order the ICR after collecting the necessary details.

For more information, check out our Guide to Foreign National Mortgage Loans with No US Credit.

Step 5: Shop for your dream home in beautiful California, the land of opportunities

In your journey to homeownership in California, it’s time for the exciting part – house hunting! Find a knowledgeable real estate agent with expertise in international transactions, like a Certified International Property Specialist (CIPS). They will help you navigate the California market and find your dream home.

Find the best real estate agent with international expertise

Connect with a local US real estate agent(s) with CIPS designation

Once you’ve chosen a property, work with your agent to draft a purchase agreement, including any additional items you want to include. This is also when you provide an earnest money deposit to show your commitment, usually a percentage of the purchase price.

For more information on the home buying process in California or to find a real estate agent experienced in international transactions, explore our guide “Can Foreigners Buy Property in California?” It provides valuable insights tailored to your needs.

Step 6: Finalize your foreign national mortgage loan application with the lender, considering different loan options and interest rates

• Explore various types of mortgages available in California to find the one that suits your needs.
• Compare interest rates offered by different lenders to secure the most favorable terms.
• Determine the down payment amount that works best for your financial situation.
• Select the appropriate term length for your mortgage, considering your long-term goals.

Completing the necessary paperwork is crucial at this stage. While you may have already provided some documents during preapproval, ensure you gather any outstanding information related to your debts, assets, credit, and income. This helps loan officers assess your application accurately.

Within three business days of applying, your loan officer will provide a Loan Estimate. This document outlines your mortgage loan terms, including estimated closing costs. Take advantage of this information to evaluate your offer and explore alternative options if desired.

Remember, finalizing your loan application sets you on the path to homeownership in California, so review the details carefully and seek guidance when needed.

Step 7: Lock in the interest rate to secure a stable mortgage rate until the closing of your loan

Lock in the interest rate to secure a stable mortgage rate until the closing of your loan in California:

• Mortgage rates in California are influenced by the daily fluctuations in the bond market.
• By locking your mortgage rate, you can ensure that your interest rate remains unchanged until the loan is closed.
• Your loan officer in California will guide you through the rate lock process, providing assistance and advice.
• It is generally advisable to consider locking the rate on your loan after accepting the loan estimate and moving forward with the lender.
• This allows you to have peace of mind and stability in your mortgage rate while navigating the home financing process in California.

Remember, locking your interest rate can provide financial security and protect against potential rate increases, making it an important step in securing a mortgage loan as a foreign national in California.

Step 8: Undergo mortgage loan processing and underwriting, ensuring all documentation is in order

• During the mortgage loan processing and underwriting stage, it is crucial to ensure that all your documentation is in order.
• A skilled loan processor will work with you to prepare your mortgage loan information and application, making sure that all the necessary paperwork is included.
• This meticulous attention to detail can help streamline the approval process for your California mortgage loan.

• The mortgage underwriter plays a key role in evaluating your eligibility for the loan based on the lender’s underwriting guidelines.
• They will carefully review your income, assets, employment history, and other relevant information provided in your mortgage application.
• Based on this assessment, the underwriter will make a decision to either approve or deny the loan.

• By ensuring that all your documentation is complete and providing any requested additional information promptly, you can help facilitate the underwriting process.
• Doing so increases the likelihood of a favorable loan decision.
• This step is crucial for foreign nationals seeking to obtain a mortgage loan in California.

Step 9: Conduct a Property Appraisal to Determine the Fair Market Value of Your Desired California Property

• During the mortgage underwriting process, a real estate appraiser assesses the California property you intend to purchase to determine its fair market value.
• The appraiser analyzes various factors, such as recent sales of comparable homes in the area, to provide an accurate valuation.
• The appraisal is crucial as it safeguards both the buyer and the lender by ensuring the property’s worth aligns with the agreed-upon price.

If the appraisal value is lower than the sales price, you have a few options:

• Cover the difference in value.
• Negotiate with the seller to reach a mutually beneficial agreement.
• Exercise your right to walk away if your purchase agreement includes an appraisal clause.

Property appraisal plays a significant role in the mortgage process, providing assurance and transparency in determining the value of your California property.

Step 10: Closing in California – Prepare, Sign, and Celebrate!

Congratulations on reaching the closing stage of your foreign national mortgage in California! Gather essential paperwork and funds, including your ID, Closing Disclosure, and required documents. Our guide, “Mortgage Closing Process: All You Need to Know About Your Closing and Closing Disclosure,” offers detailed insights.

Sign the documents, receive your keys, and become a proud homeowner in California by following our foreign national mortgage guidelines. Also, check out Can Foreigners Buy Property in California?

Foreign National Mortgage Rates in California

• Current rates range from 7.8% to 8.99% (as of 3 July 2023).
• Creditworthiness is assessed based on international credit reports.
• Interest rates are typically 50-75 bps (0.5%-0.75%) higher than prevailing mortgage rates.
• Although, you must put down a larger down payment than the standards, at least 20% – 25%.

Closing Costs and Fees for Foreign National Loans in California

When securing a foreign national mortgage in California, it’s crucial to consider the associated closing costs and fees. Here is a breakdown of the estimated closing costs and fees expressed as a percentage of the loan amount:

A. Loan Costs – 1.11%

• Origination Charges: 1.11% (including points, application fee, and underwriting fee)

B. Services You Cannot Shop For – 0.414%

• Appraisal Fee: 0.25%
• Credit Report Fee: 0.018%
• Flood Determination Fee: 0.0123%
• Flood Monitoring Fee: 0.0197%
• Tax Monitoring Fee: 0.046%
• Tax Status Research Fee: 0.068%

C. Services You Can Shop For – 1.97%

• Pest Inspection Fee: 0.08%
• Survey Fee: 0.04%
• Insurance Binder: 0.43%
• Lender’s Title Policy: 0.33%
• Settlement Agent Fee: 0.31%
• Title Search: 0.78%

D. Taxes and Other Government Fees – 0.052%

E. Prepaids – 0.534%

• Homeowner’s Insurance Premium: 0.373%
• Prepaid Interest: 0.161%

F. Initial Escrow Payment at Closing – 0.254%

• Homeowner’s Insurance: 0.124%
• Property Taxes: 0.13%

G. Other – 0.627%

• Owner’s Title Policy: 0.627%

J. Total Closing Costs (A+B+C+D+E+F+G) – 5%

Please note that the percentages mentioned above represent estimated values as a percentage of the loan amount. It’s important to consult with your lender and review the closing cost disclosures for more accurate and detailed information specific to your foreign national mortgage in California.

Find the Best US Lender for Foreigners

Get pre-qualified for an US Mortgage with No US credit

Understanding Cash Flow Assets for Foreign National Mortgages in California

When applying for a foreign national mortgage in California, lenders may consider various factors to assess your creditworthiness and ability to make monthly mortgage payments. One essential aspect that lenders may evaluate is the availability of cash flow assets sourced by the borrower to streamline the loan process.

Cash Flow Assets Sourced and Mortgage Approval

In addition to other eligibility criteria, lenders offering foreign national mortgages in California may consider the presence of cash flow assets sourced by the borrower. These assets can contribute to demonstrating financial stability and a higher likelihood of meeting monthly mortgage payments. Cash flow assets may include:

• Rental Income: If you own investment properties generating rental income, lenders may consider the positive cash flow from these properties as an additional source of repayment.
• Investment Portfolio: A well-managed investment portfolio with consistent income streams can showcase financial strength and stability, positively influencing the lender’s decision.
• Business Revenues: If you own a business that generates reliable and consistent revenues, lenders may factor in these cash flow assets when evaluating your loan application.

Remember, each lender may have different criteria and requirements for assessing cash flow assets, so it’s advisable to consult with multiple lenders specializing in foreign national mortgages to explore the best options available to you.

Benefits of Foreign National Mortgage Loans California

• Access to the California real estate market: Foreign national mortgage loans allow non-U.S. citizens to invest in one of the most desirable real estate markets in the world.
• Establishing a U.S. presence: Owning property in California can provide foreign nationals with a physical presence in the United States, offering potential personal and business-related advantages.
• Long-term investment potential: California real estate has a history of strong appreciation, making it an attractive long-term investment option for foreign buyers.

Conclusion

Foreign nationals can invest in California’s real estate market through foreign national mortgages. However, these options often require larger down payments and may have slightly higher interest rates. Understanding the requirements and building a U.S. credit history can improve eligibility. Seeking guidance from mortgage professionals is crucial for a smooth property purchase process as a foreign national in California.

We connect you with understanding lenders to guide your mortgage application process and begin your journey to homeownership in California today.

Find the Best US Lender for Foreigners

Get pre-qualified for an US Mortgage with No US credit

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About the author:

Amresh Singh is the founder & CEO of HomeAbroad and has an extensive 12+ years of experience in the financial services and mortgage industry – building business development and product strategy and leading customer strategy
in the financial services industry domain.

Prior to co-founding HomeAbroad, Amresh has worked for one of
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