Mortgages, the bad and the ugly, oh, and maybe a bit of good!
What a tumultuous time and not to mention inconvenient! Just when property is half off in Florida, is there a mortgage to be found?
The good news is that it’s not impossible to arrange a mortgage in the US for a non US resident but be prepared to verify everything, gone are the days when we enjoyed non status. Gone are the days when we promised specific closing dates, and gone are the days that flaming hoops were not a standard part of the qualification process.
All joking aside though, mortgages are harder to find and certainly harder to qualify for. The US mortgage process, aside from the lingo, is really quite similar that of the UK. Instead of using income multipliers, US lenders work with a “debt to income” ratio. Quite simply it is your monthly debt (current mortgage, credit cards, car payments and the proposed new mortgage payment) divided by your monthly income. No rental income on the new property can be used and the ratio must be less than 45%.
More good news is that the few lenders still offering mortgages to Non US residents, generally are looking for a letter that states 2 years of income and year to date earnings. This can be more forgiving to the self employed as audited trading accounts are not usually required.
Mortgages are generally a maximum of 70%of the purchase price at the moment and rates are all over the board. It is not unusual to expect that a non US resident would be in the mid 7’s to 8’s.
It also makes a big difference what you are buying. For instance, condominiums are more difficult to arrange financing on than a detached villa.
Even with the higher rates and more stringent lending guidelines, the hardened investors are swarming in. It’s hard to pass up the best buyer’s market that I have ever seen. It makes sense to purchase at this time and sit on the property and just realize that you might not get the mortgage of your dreams. No vacuum exists forever and it will be a matter of time before some sense of normalcy returns to the mortgage market. We will probably never see it quite as it was but I’m sure that it will relax some more and the potential to re-mortgage later is more probable than the opportunity to buy at this price later.
For those of you that already own property in Florida and have “Option ARM” (negative amortizing) mortgages, now is a perfect time to modify the interest rate at the bank’s expense. They may be offering heavily discounted terms to entice you to switch out of this type of scheme, the problem being that the lenders are inundated with this type of request and cannot keep up.
Should you have any questions on modifying an existing mortgage, we have a section on our website that explains the process in detail
Standard documentation for a mortgage is comprised of the following:
4 page application and a stack of legal disclosures
International credit report (ordered by the lender)
Letter from employer (or accountant if self employed) stating 2 years income and YTD earnings
2 months bank statements
Proof of wire transfer of funds
A US bank account (this is the easiest part) with at least 6 months reserve mortgage payments deposited
A copy of passportValuation (ordered by the lender)
Wednesday, November 5, 2008
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