Can a foreign national qualify for a conventional mortgage?

The U.S. real estate market attracts many international investors with its vast opportunities. Yet, diving into the world of mortgages can seem complicated, especially for foreigners. Many often mix up 'conventional' and 'conforming' loans. While most people use these terms interchangeably, in the mortgage world, 'conventional' can often point to non-conforming loans. for clarity in this guide, we'll use 'QM' for conforming and 'non-QM' for non-conforming loans. By understanding the distinction, foreign nationals can better grasp conventional mortgages for foreigners and make informed decisions.

Overview

• Understanding Conforming Mortgages: Delve into what makes a mortgage 'conforming' and the guidelines set by Fannie Mae and Freddie Mac.
• Exploring QM and Non-QM Loans: A comparison of the standard and the flexible, and what each means for foreign investors.
• Eligibility Constraints: Why conforming mortgages might be a stretch for many foreign nationals.
• Non-QM Options: An introduction to the flexibility of non-conforming loans and their potential advantages.
• Program Comparisons: A juxtaposition of paying cash, conforming, and non-QM mortgages for a comprehensive understanding

What is a Conforming or QM Mortgage?

Conforming mortgages are loans that adhere to the guidelines set by Fannie Mae and Freddie Mac, two government-sponsored enterprises. These loans are characterized by their adherence to limits set by the Federal Housing Finance Agency (FHFA), contrasting with FHA loans, which are insured by the Federal Housing Administration, and VA loans, backed by the Department of Veterans Affairs, designed for military veterans.

Different Conforming/QM Mortgage Programs

• Fixed-rate mortgages: Stability with unchanging interest rates.
• Adjustable-rate mortgages: Initial low rates with potential fluctuations.
• Conforming loans: Adhering to limits set by the FHFA.

Eligibility for Conforming Mortgages

Conforming mortgages, while popular among U.S citizens or permanent residents, often present challenges for foreign nationals. The stringent guidelines, influenced by the regulations set by Fannie Mae and Freddie Mac, often necessitate a robust U.S credit history and residency status1.

Difference Between a QM and Non-QM Mortgage

While QM mortgages adhere to government guidelines, non-QM mortgages are more flexible and can be more accommodating to foreign nationals.

Different Non-QM Mortgage Programs

• Jumbo loans: Exceeding conforming loan limits.
• Bank statement loans: Catering to self-employed individuals.
• Asset-based loans: Focusing on the borrower’s total assets.
• Non-income investment loans: Loans based on the investment but not income.
• DSCR loans: Loans based on Debt Service Coverage Ratio.
• Foreign national loans: Tailored loans for international investors4.

Comparative Chart of Major Mortgage Types

Foreign nationals often resort to paying cash, given the stringent requirements of conforming loans. However, the developing availability of flexible non-QM loans is changing this narrative. The following chart compares paying cash to conforming and non-qm mortgage loans for foreign nationals and the general requirements to explore each avenue.

Milo’s non-QM mortgage loan programs for foreign national investors

A comprehensive exploration of Milo's diverse array of mortgage programs designed for the unique needs of international investors:

Equipped with the knowledge from this guide, foreign nationals can better navigate the U.S. mortgage landscape, making well-informed decisions that align with their real estate ambitions.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.