The light is green. Investors who have followed the US market in the last weeks, months, and years realize now: their time has come. The development of the US house prices, the interest rates and the USD exchange rate point in one clear direction – if you are thinking about investing, do it now!
In order for you to do everything right from the very first step and in order to make optimal use of time and information, we created a “Financing-Guide” for you:
What can I finance as a foreign national?
First and foremost, inform yourself about whether the property you wish to finance is actually financeable. Land loans in most states for example are not available for foreign borrowers at the moment. As consultants we are constantly working closely with a number of banks and therefore have a better overview and comparisons about financing possibilities than a single U.S. bank.
What can I afford as a foreign national buying in the USA?
For your own information as well as verification for the seller you will need a “Pre-Approval”. This is a written statement which qualifies you based on some specific information (earned income, expenses, credit worthiness) for a particular purchase price and loan amount. For this you do not yet have to provide any evidence, just complete a questionnaire.
What will a mortgage cost me?
During your first communication with us you will receive a non-binding statement of costs. This statement lists all costs which will arise in connection to the financing and the purchase of the property (total costs of capital acquisition, required equity, monthly costs).
You choose a credit application.
To do this you do not have to be in the USA, it can be easily done via e-mail, fax, or over the phone. It is necessary to have a purchase contract ahead of time because all financing is specific to a property. Those who wish to finance should pay special attention to the finance contingency clause in the contract, also referred to as the “Finance Contingency”. It states that the financing is a substantial part of the purchase contract and further states that if loan approval should not take place the buyer can cancel the purchase and ask for the return of the deposit – an important safety precaution for you to protect yourself and your money.
Your application will not be submitted to the bank until all documents are complete. Only after completion will your creditworthiness and the respective property be inspected. During the process of checking your credit the US bank will order the appraisal for the house. The appraisal involves a comparison of the subject property with three to six others similar in location and construction. These comparison properties must be located within a comparable location to the desired property and must have been sold within the last few weeks or months.
For the final loan amount the US bank will take the lower of two values: purchase price or appraised value. In the ideal case these two values are the same.
If all conditions are agreed upon, the US bank will write a “Commitment” letter. In order to avoid unnecessary costs, the remaining services in connection with financing will not be incurred until now. This also includes insurance which insures your home from hurricanes, fires and other accidents or incidents.
Once everything is completed, you will need to transfer your equity to your US account or immediately into your trust account with the title company. The “Cash-to-Close” is made up of your down payment, costs of capital acquisition and reserve which are usually six months of monthly installments.
The last step is for the US bank to send the closing documents to the title company or to the lawyer handling the closing. They carry out the simultaneous closing and thus hold fiduciary and notary functions. They will also prepare the actual closing statement otherwise known as the HUD-1 statement: This will show all the costs to you and to the seller and will enter your name as the new owner as well as on the recorded mortgage, deed and note. You do not need to be present in the US during the closing, instead you can receive the documents via e-mail, print these out, and then have them signed by the civil notary or have them certified by the US consulate before sending them back to the US via a courier.
