Foreign National Loans Explained: Financing US Rental Property as a Non-US Resident

A foreign national loan is a US mortgage for someone who doesn't live in the US and has no US credit history. It exists because regular US lenders can't underwrite a borrower they can't see in their own systems. The loan fills that gap, and you pay for the convenience with a larger down payment and a higher rate.

This post covers the general case for any non-US resident. If you're Canadian, the Canadian version has the cross-border details and a worked example.

Who counts as a foreign national

Lenders use the term for someone who isn't a US citizen or permanent resident and doesn't hold a US work visa that lets them show US income. You might live in Canada, the UK, Mexico or anywhere else, and own no property in the US yet.

Two nearby groups are treated differently:

• Visa holders and recent immigrants with a Social Security Number and some US credit history can often qualify for regular loans or special programs, with their US income as the basis.
• ITIN borrowers are people who file US taxes under an ITIN and live in the US, sometimes without a Social Security Number. They have their own programs that usually rely on US income and credit.

A foreign national loan is for people in neither group.

How the loan works

Most foreign national loans are DSCR loans. The lender looks at the property's rent compared with its monthly payment. If the rent covers the payment with some margin, the loan can go through without a US credit file or a US paycheck.

Typical terms, which vary by lender and by month:

• Down payment: 25% to 35% is common, and a lender may ask for more on a first purchase or a lower-rent property.
• Interest rate: usually higher than the rate a US resident gets on a conventional investment loan.
• Term: 30-year fixed is common, with an interest-only option on some loans.
• Reserves: commonly six to twelve months of payments held in an account the lender can verify.
• Prepayment penalty: often three to five years, stepping down each year.
• Property types: single-family and small multifamily homes are fine. Condos can be harder, depending on the association.

What you'll need to provide

Lenders differ, but the usual list is short:

1. A valid passport
2. Proof of your address in your home country
3. Bank statements that show the source of the down payment and reserves
4. A signed purchase contract
5. An appraisal, which the lender orders
6. A lease or a rent estimate for the property

Whether you need an ITIN to close varies. Some lenders ask for one, some don't. You'll likely need one anyway to file the US tax return on your rent, so apply early either way.

Credit

Without a US credit score, lenders use other evidence. That might be a credit report from your home country, reference letters from your bank, or nothing, because the DSCR is doing the work. Ask your broker up front which method the lender uses. A lender that checks credit can reject you on something you didn't know about.

If you want to build US credit, ask whether the loan is reported to the US credit bureaus. Many foreign national loans aren't.

What it costs

A foreign national loan costs more than a conventional one. The difference shows up in the rate, in the cash you put down and in the closing fees. Run the full numbers before you assume a market works for you. A deal that clears 8% cash-on-cash at 20% down and a 7% rate can look much weaker at 30% down and 8.5%. The calculator takes custom down payment and rate inputs so you can check, and the cash needed to buy post shows what else to save for.

Taxes still apply

A loan is only part of buying from abroad. As a foreign owner you'll pay US tax on the rent (the Canadian walkthrough shows the mechanics, which are similar for most non-residents, though treaties differ), and there are withholding rules when you sell. The FIRPTA entry explains the sale side. How your home country taxes the income depends on where you live, so talk to an accountant who knows both.

How to shop

Use a mortgage broker who places foreign national loans regularly, and get at least two quotes. Ask about minimum DSCR, reserves, prepayment terms, whether the rate is fixed, and how long closing takes, which is typically a month to six weeks. Compare total cost over the years you'll actually hold the loan, since a lower rate with a heavy prepayment penalty can cost more if you plan to sell early.