What Is a Foreign National Mortgage?

A foreign national mortgage is a real estate loan issued to a foreign national who is a resident of a country, but not a citizen. Foreign nationals are allowed to buy real estate in most regions of the world but they represent an increased loan risk, and banks may be reluctant to originate mortgages for them. Financial institutions that do offer loans to non-citizens advertise their foreign national mortgage services and may provide other assistance to prospective home buyers who are preparing to make real estate purchases.

The bank is usually domestic, and may offer a variety of lending services as well as loans to foreign nationals. To qualify, the borrower must put down a large down payment to mitigate risks to the lender. Lenders may ask for 20% to 30% down on the loan, as they have concerns about the loan-to-value ratio. If this ratio is high, the borrower may have an incentive to default, and could leave the country, which would make it difficult to pursue collection actions.

Banks that originate foreign national mortgages also need to consider risks in the credit evaluation process. Foreign nations who have been residents for a long time may have established domestic credit, and the lender can look up their records to determine if they are good loan risks. New immigrants do not have a domestic credit history and will need letters of reference for the lender to review. Lenders can also request credit reports from their home nations to look for obvious risks like a history of default or high personal debt.

Borrowers are most likely to get a good deal on a foreign national mortgage if they seek out a bank in an area with a large immigrant population. Financial institutions in these regions are accustomed to dealing with foreign nationals. They may have special loan programs, incentives, and other services, in contrast with banks that are unfamiliar with originating loans for non-citizens. A mortgage broker can help buyers locate lending services and provide information on the best loans.

The interest rate on a foreign national mortgage will depend on the risks presented by the borrower. Borrowers with a good credit history, a large down payment, and a secure source of income typically pay low interest, just like citizens. Borrowers that are more risky may be offered a higher interest rate, although it can be possible to pay points to lower the interest. It can be a good idea to rate shop before selecting a foreign national mortgage.