Financing for Foreign Nationals Discontinued – Easy Come, Easy Go

Once again the mortgage lending guidelines have changed with the wind. For a brief period there was a window for foreign nationals to obtain mortgage financing on investment and second homes in the United States with down payments as low as 25%, but now that window has been slammed shut along with a host of other “make sense” loan programs. (Don’t even get me started on condo hotels that can’t be financed by anyone with even 50% down!) 

Many of the foreign nationals who contacted us in recent weeks were willing to put down as much as 30% to 40% or even 50% on Las Vegas foreclosures. With the current housing market crunch, what are the big banks thinking? Here are people with real money, good credit and big down payments that would love to take advantage of lower prices and they can’t get financed?!!! Some of these investors were already under contract on projects in development, and they may have to walk away from substantial deposits unless alternative financing is brought online. (Just as a side note, permanent resident aliens are still able to obtain financing on the same terms as US citizens. If you are a permanent resident alien and need a Las Vegas mortgage, please contact us at 702-985-7654 so we can put you in touch with the right lender.) 

On top of all this, with the stock market dives globally, even those foreign investors who didn’t need financing and were planning on paying all cash are now stepping back as they watch the value of their portfolios diminish. The Euro is back down to 2005 levels and the British pound has plummeted even below that level. 

Canadians, who saw their dollar rise to all an all time high against US currency at $1.10, have watched it tumble in just the past few days to 79 cents versus the US dollar. Literally thousands of Canadians were looking for winter getaways in the US, but have had to put their plans on hold. Again, many of these were all cash buyers looking for modest Las Vegas condos under $100k, but with the devaluation of their dollar they have once again been priced out of the market without financing. 

And even US citizens are being crunched/punished in the mortgage marketplace. The latest is that anyone who has three or more properties with any kind of mortgage on them cannot get financing for a fourth property. Again, even if they are willing to put 50% down and have low loan to value ratios on their existing properties and excellent credit and income, they still can’t get a fourth loan. Not even if you’re Donald Trump. 

With all the resale Las Vegas homes and condos for sale, not to mention the hundreds of thousands nationwide, and all the opportunities to pick up great deals on foreclosures, our banks are not willing to lend to these impeccable buyers who want to buy and have money. Certainly I am not suggesting we should go back to no or low money down programs with no income or asset verifications. But why not create some solid loan programs to entice these good buyers, whether or not they are citizens of the US? The banks would be able to lower their inventories of properties substantially, which would in turn stimulate the economy and gradually raise prices again in a controlled manner.  

All I know is that in the months to come, those with cash who are willing to take a chance on the market now are probably going to come up looking like geniuses in couple of years. My other prediction is that while Las Vegas real estate was one of the first to fall, it will also be one of the first to recover, and I am personally putting my money where my mouth is.

Foreign Investors Scramble for Financing on Las Vegas Real Estate

With the dollar expected to rise against foreign currencies later this year (that trend has already started), foreign investors are hurrying to purchase real estate in the US while their dollar goes further. Most of these investors are targeting the Las Vegas real estate market in particular, where the sharp decline in prices (due to the high amount of Las Vegas foreclosures) and the world class amenities have made it an attractive get-away destination. In particular, Canadian buyers are looking to Las Vegas homes as a vacation retreat from their harsh winter climate.

Most banks will not loan on real estate outside of their own country. With all the recent shifts in the credit markets, the qualifying criteria has changed for mortgage loans in the United States across the board, including those to foreign purchasers. Prior to this year, a foreign national could obtain financing from US banks as long as they had 35% to put down with no or limited documentation. Now US mortgage lenders are requiring full documentation of income and assets on all mortgage loans without exception, though the down payment requirements have dropped.

A citizen of a country other than the US can obtain a loan for property in the US based on what classification they fall under. A permanent resident alien is a foreign national who has been granted the right to work in the US permanently and who has been given a US social security number. A permanent resident alien can purchase property under the same guidelines as a US citizen. They can get a loan with as little as 5% down payment for a primary residence, either on a fixed rate or adjustable rate mortgage at the current interest rates available to US citizens.

All other foreign nationals, including those with temporary work visas, are required to put down a minimum of 25% for properties under $650,000 or 35% for properties over $650,000, whether the property is a primary residence or a rental property. Lenders will also require the equivalent of a US TRW rating as well as full documentation of their employment income and assets. In addition, the down payment money must be “seasoned” in a US bank for at least 60 days prior to the close of escrow.

These loans to foreign nationals are only currently available as adjustable rate mortgages or ARMS. The fixed rate terms can be for 3, 5, 7 or 10 years and interest rates are currently running between 7.5% and 8.5% with approximately 5 loan discount points prepaid for the amount of the loan (points can vary on a day to day basis just like interest rates). Each point is the equivalent of 1% of the loan amount, so on a $100,000 loan 5 points would be $5,000.

Another alternative is for the foreign national to obtain an equity credit line on their property in their home country and come to the US with cash in hand. Cash offers are very strong, and enable the buyer’s agent to negotiate the best possible price on behalf of their client.

For more information on getting qualified for a Las Vegas mortgage and to receive the latest listings on great deals in Las Vegas new homes, high rise condos or MLS listings, please contact our office at 702-985-7654 or email us at sold@greatlasvegashomes.com.