Lenders are granting non-U.S. residents better access to credit, i.e., loans, in order to finance investment properties or vacation homes. This is happening through a foreign-national mortgage without them ever having to step into the U.S. This loan service for people abroad requires that they put at least 40 percent down on a property. These international investors are assisting close the gap left by the American people. The domestic investors are no longer biting because most of the foreclosure inventory is no longer appetizing. And, the middle-class borrowers cannot afford it due to stagnant income growth.
One lender that is based in Orlando, Florida has had a 65 percent increase in foreign buyers compared with 2013. Many foreign buyers are now buying 4 properties on loans instead of 2 properties cash. Banks are requesting that non-U.S. residents put a down payment of 30 to 40 percent of the purchase prices. Residents are only required to 20 percent, which is why banks are lending more to foreigners. Cash buyers have been at the lowest, 33 percent since September 2008, therefore providing loans to nonresidents who have at least six months of cash reserves with a 30 percent down payment and usually only a two percent increase in their conventional loans.
The U.S. credit and tax system work very differently than the rest of the world. This causes some difficulty when it comes to lending to foreigner-only. This is because the banks are forced to rely on documentation from accounts and employers, along with third parties. A mass amount of nonresidents purchasing properties with loans do it to establish credit in America. Although they may have millions in their bank, if they have no credit, it is still not an easy path for them to obtain a loan.
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