How much can I finance when buying a house in the United States as a foreign national?
In almost all regions of Florida foreign investors can finance up to 70%. 70% – of what exactly? Of the purchase price? Of the published tax value? Furnished or unfurnished? And what about the boat?
To start: You can finance anything that is attached to the property. Specifically, the home itself, the pool, the screen, the boat dock, the sea wall, appliances etc. What a loan does not include however is furniture, car, boat etc. This is important because often time the furniture is included in the purchase price.
So how exactly does one measure the mortgage value?
US banks always base the mortgage on the lower of the two values of purchase price or appraised value. The appraised value is determined by a certified, licensed appraiser assigned by the bank. The appraiser will take a look at your house and compare it to 3-6 other houses located in the same or a similar neighborhood which have been sold in the previous weeks / months. Since you cannot compare apples to oranges adjustments will be added or deducted for property differences. Listings or properties which have not been sold are also used for the comparison, but only to justify the appraised value and completed sales. In addition, if there are forced sales, foreclosures, short sales, etc. in your neighborhood this can also have an impact on the market value of your dream property. Separate from the financing, an appraisal is also a very important and interesting document for you which documents exactly how much your house is currently worth and how this worth is calculated.
So what happens if the appraisal turns out to be too low?
This is no problem with financing! You have three options – provided, that you have included the so called “Finance Contingency” in your contract. This financing clause provides that if the financing is not plausible due to an appraisal that is too low for example, you can resign from the contract and have your deposit returned to you.
Option I:
You choose to resign from the contract.
Option II:
You invest the difference in the down payment needed in order to balance out the lower funding level.
Negotiations start over – you and your realtor can try to re-negotiate the price with the seller.
An appraisal is therefore a very helpful and important tool with which you can protect yourself during the purchase transaction.
