Vol.31 - How to qualify for mortgage financing for residential property in the US

How to qualify for mortgage financing for residential property in the US
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By James Robinson, Proprius Investments Ltd.| October 20, 2005 | Comment on this article

So you have decided that you want to take advantage of the financial benefits of investing in residential property in the United States. You have completed your goals and planning document. You have saved your down payment money. You have researched and selected the real estate market that you think has the most upside potential. Now you need to find financing and get pre-approved.

You will most likely be faced with one of three issues:

Issue #1 You are an American but have not kept or even for that matter ever opened a credit account in the US.
Issue #2 You are not American, have not lived in the US, and don’t know anything about the credit system.
Issue #3 You are an American have lived and worked in the US for a few years and have a credit history in the U.S. system.

Let’s explore the base of what all cases will need to have in order to qualify for financing.

First, all lenders will want to know that you have some source of income and what that income amount is and where it comes from. i.e. a job or a business. Second they will want to know that you have down payment money plus six months of reserves. Reserves can be stock, bonds, or cash. Both of these monies will need to be denominated in US dollars and it is best if the bank statements are printed in English. Third, the lender will need your Tax Identification. For Americans or others who have worked in the US that is your Social Security number. For others the government will issue a tax ID or ITIN (Individual Tax Identification Number) with the filing of the appropriate forms.

Now with that base established let’s address each Issue individually.

Issue #1Solution: If you have lived in Japan for a while you will most likely have established some type of credit account with Citibank, Tokyo Mitsubishi or some other financial institution. You will need to have at least 4 tradelines open for a minimum of 12 months. Each of these institutions will need to provide you a letter in English stating the length of time the tradeline has been open and the amounts of loans that have been borrowed by you. The letter will also need to state what your payment history has been. Hopefully they will all write that your payments have always been on time. The lender will also require the accompanying bank statement.

Issue #2 Solution: If this is your situation you will need everything in from the paragraph about plus the following: First and foremost your citizenship or residency may not be in a country that is sanctioned by the US government. Second, you will need one of the following visa types B-1, B-2, E-1, E-2, H-1B, H3, J-1, L-1 and O1. There is one exception: No visa is required for borrowers who are citizens of countries participating in the US Visa Waiver Program. Such countries include: Japan, Australia, New Zealand, Canada, and United Kingdom. Finally, you must also provide a valid foreign passport and an I-94 Form.

Issue #3 Solution: If this is your situation you will need the base requirements plus your credit score will need to be above 680. You will also need to have at least 3 credit accounts open for 12 months. The lenders like to see that you are actually using credit and paying on time. That is all that is required.

This is one way to receive the financing. There is always more than one way to accomplish one’s goals. There are international lenders who will provide mortgages in US Dollars and Yen. The other way you can get around some of these tasks is to partner with someone who can take care of many of these issues.

There is a lot to do in order to qualify for a US Dollar based mortgage, but in my opinion it is worth jumping through some hoops in order to access all the benefits of real property investments: positive cash flow, equity growth and major tax advantages.

James Robinson
Proprius Investments Ltd
President & Broker
Sacramento, CA
www.propriusltd.com

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