Why You’re Not Qualifying for a U.S. Mortgage

If you’re an international investor interested in U.S. residential investment property but haven’t been able to secure a mortgage, you’re not alone. Lenders often apply specific criteria that can disqualify potential buyers. Below are five key reasons why you might not be meeting the qualifications for a U.S. mortgage, along with insights into how Milo evaluates clients differently.

1. Not Enough Liquid Assets

Cross-border mortgage lenders typically require a low debt-to-income (DTI) ratio, which means your income must significantly exceed your mortgage payments. Milo offers more flexibility by not using DTI as a primary qualifier. Instead, we focus on liquid assets to ensure you have enough funds to cover down payments and closing costs. As a rule of thumb, you should have at least 35% of the property’s purchase price available in liquid assets. This approach enables Milo to assess clients on financial stability rather than income.

2. Property Doesn’t Meet the Lender’s Minimum Loan Amount

Lenders often set minimum loan amounts due to the cost of servicing the loan. For example, if a lender has a minimum loan amount of $200,000 and the maximum loan-to-value (LTV) ratio is 75%, then your property must be valued at least $290,000 to qualify (since $290,000 * 75% = $217,500 loan amount). The lender may not approve the mortgage if the property’s value falls below this.

3. Ineligible Property Type

Many lenders restrict the types of properties they will finance. For instance, Milo only services loans for residential properties. Properties such as land purchases, construction loans, and those with significant acreage may not qualify. Additionally, multi-family residential units are typically capped at eight units. If your property has more than eight units, it may be classified as commercial and would require a different type of lender. Furthermore, if the value of the property is heavily tied to the land rather than the home itself, it could be disqualified from financing.

4. Missed Mortgage Payments

Having missed payments or liens on the property will raise red flags for lenders, especially if you’re looking to refinance. Most lenders, including Milo, require a clean payment history for at least 12 months to demonstrate your ability to repay. Missed payments during this period could indicate a lack of financial stability, making it difficult to qualify for refinancing.

5. Insufficient Equity

When refinancing, lenders evaluate the amount of equity in your property. If the property is valued at $1 million, but you have an $800,000 loan, it leaves only 20% equity. Lenders generally prefer a loan-to-value (LTV) ratio of no more than 75% to 80%. With only 20% equity, there’s little room to take out additional cash, making it challenging to qualify for a refinance.

By understanding these five factors and how lenders view them, you can better prepare for the U.S. mortgage application process. Milo’s approach is to provide more flexibility for international clients by considering liquid assets and property specifics, giving you a clearer path to achieving your U.S. real estate investment goals.

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.