In the USA, a mortgage loan is a type of loan used to purchase or refinance a home or other real estate property. The borrower, typically a homeowner or homebuyer, pledges the property as collateral for the loan.
The two main types of mortgage loans in the US are:
1. Fixed-rate mortgage: This type of mortgage loan has a fixed interest rate and a fixed monthly payment throughout the life of the loan, typically ranging from 10 to 30 years.
2. Adjustable-rate mortgage (ARM): This type of mortgage loan has an interest rate that can adjust periodically based on market conditions. The initial interest rate may be lower than that of a fixed-rate mortgage, but it can increase over time, resulting in higher monthly payments.
When applying for a mortgage loan in the US, the lender will typically require the borrower to provide proof of income, credit history, and employment status. The lender will also assess the value of the property being purchased or refinanced, as well as the borrower's debt-to-income ratio, to determine the loan amount and interest rate.
It's important to shop around and compare offers from different lenders to find the best mortgage loan for your needs. Additionally, borrowers should carefully review the terms and conditions of the loan, including any fees, prepayment penalties, and other costs.
Do You Have to Be a U.S. Citizen to Get a Mortgage?
No, you do not need to be a U.S. citizen to qualify for a mortgage. Foreign nationals can qualify for a mortgage, as long as you can prove your residency status and meet the loan’s eligibility requirement.
It's certainly possible to get a mortgage if you're not a U.S. citizen. In fact, a 2020 study from the National Association of Realtors (NAR) revealed that 62% of resident foreign home buyers purchased their homes with U.S.-based financing.
The process can vary depending on your residence status and other factors, but lack of citizenship shouldn't present an issue when it comes to securing a mortgage loan. Here's how to qualify for a mortgage as a non-U.S. citizen.
Is It Possible to Get a Mortgage As a Foreign National?
Documentation requirements when applying for a mortgage loan will largely depend on your resident status—whether it is permanent or non-permanent. In either case, buying a home in the U.S. is typically a matter of providing the required immigration and visa documents and meeting the loan criteria.
Meeting eligibility requirements may be challenging for some foreign nationals with limited credit information, as it may take some time to establish a solid history and credit score in the U.S. Fortunately, some lenders do not require borrowers to have a FICO Score and may elect to use a borrower's international credit score to evaluate their credit history. Additionally, lenders may use non-traditional methods to assess the creditworthiness of applicants with a thin credit history or no credit score. That may involve the lender reviewing:
• Payments for rent, utilities and other recurring bills
• Bank account information, including recurring payroll deposits
• Employment verification
• Property records
How Residency Impacts a Mortgage?
The process of qualifying for a mortgage is similar to what U.S. citizens experience if you're a permanent resident with a green card or a non-permanent resident with a work permit or valid work visa. That's because a lawful resident of the U.S. is eligible for a mortgage on the same terms as a U.S. citizen, according to standards published by Fannie Mae and Freddie Mac—the government-sponsored enterprises that guarantee most mortgages originating in the U.S.
However, those standards can cause it to be more challenging for foreign nationals who don't reside in the U.S. to qualify for a mortgage.
A lender may still approve a mortgage loan for a foreign national whose primary residence is outside the U.S., but that means they won't sell the loan to a government-sponsored enterprise. In this case, the lender may require a significant down payment (as high as 30% to 50%) to help offset their risk.
Mortgage Requirements for Non-U.S. Citizens
Non-U.S. citizens must establish lawful residency in the United States to be eligible for Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) home loans. A borrower may meet this guideline if they have the following:
• A Social Security number (SSN) or, alternatively, an Individual Taxpayer Identification Number (ITIN).
• They maintain "current" and "verified" status, supported by a valid employment authorization document (Form I-766/EAD) or a green card (Form I-551), work visa or other documentation proving current immigration status.
Many lenders may accept specific visas instead of an EAD as proof of your legal non-permanent resident status, including:
• NATO series (NATO 1-6)
• Canadian and Mexican NAFTA series (TN)
• E series (E-1, E-2, E-3)
• G series (G-1, G-2, G-3, G-4, G-5)
• H series (H-1B, H-1C, H-2, H-3, H-4)
• L series (L-1A, L-1B, L-2)
• O series (O-1A, O-1B, O-2, O-3)
In addition to establishing your legal residency status, you'll also need to provide documentation that shows the lender you meet standard mortgage requirements such as:
• Employment and income verification: Be prepared to show recent pay stubs and W-2 forms covering the past two years. If you're self-employed, 1099 forms from the past two years and/or a current profit and loss statement may suffice.
• Asset verification: You may need to provide banking and investment account statements, such as savings, checking, retirement and brokerage accounts.
• Financial liabilities: Your lender will want to understand your monthly debt obligations and certain other financial responsibilities. This includes bills for credit cards, auto loans, student loans, medical bills, alimony, child support and so on.
• Personal information: You'll need to provide personal identification, a Social Security card, rental history and immigration paperwork.
Applying for a mortgage loan in the USA typically involves several steps. Here is a general guide on how to apply for a mortgage loan in the USA:
1. Check your credit score: Before applying for a mortgage loan, it's important to check your credit score. Lenders use your credit score to determine your creditworthiness and the interest rate you may qualify for. You can obtain a free copy of your credit report from the three major credit bureaus - Equifax, Experian, and TransUnion - once a year at AnnualCreditReport.com.
2. Determine how much you can afford: Use a mortgage calculator to estimate how much you can afford to borrow based on your income, expenses, and down payment. You can also speak to a lender to get pre-approved for a mortgage loan, which will give you an idea of how much you can afford.
3. Gather your documents: When you apply for a mortgage loan, you will need to provide several documents, including your income statements, tax returns, bank statements, and proof of employment. Be sure to gather all the necessary documents before applying.
4. Shop around for lenders: Compare mortgage lenders and their rates, fees, and terms. You can use online comparison tools or work with a mortgage broker to help you find the right lender.
5. Submit your application: Once you have chosen a lender, you can submit your mortgage application online or in person. Your lender will review your application and let you know if you are approved.
6. Get a home appraisal: Your lender will order a home appraisal to determine the value of the property you are buying.
7. Close on your loan: If you are approved for a mortgage loan, you will need to sign closing documents and pay closing costs. Your lender will provide you with a final loan estimate, which will detail all the costs associated with your mortgage loan.
Remember that the mortgage application process can be complex and time-consuming. It's important to do your research, ask questions, and work with a lender that you trust. Whether you're a U.S. or a non-U.S. citizen, having strong credit can help you qualify for more favorable mortgage rates and terms. Whether you're building your credit from scratch or improving your current credit score, you may benefit by getting a free copy of your Experian credit report and credit score to see where you stand. You can also enroll in Experian's free credit monitoring tool to check your credit-building progress.
