It isn’t easy today to get a bank or life company to fund a real estate loan to someone with great credit.  Think how hard it is to find a lender to make a loan to a non-U.S. Citizen with literally no credit history.  It’s hard!

Who Are Foreign Nationals?

The term “foreign national” can cover several categories.  The first category, and probably the most common one, is someone that was not born in the U.S. but has subsequently moved here and has a “Green Card”.  The Green Card is another name for a “permanent resident visa”.  This type of visa allows the holder to stay in the U.S. for the rest of their life and they have most of the privileges of a full citizen except they cannot vote.  Anyone who holds a Green Card has the right to apply for full U.S. citizenship, take a test, and then receive a formal citizenship oath and become full citizens.

If a Green Card holder has a permanent residence in the U.S. and has a social security number, bank accounts here, and a credit history from one or more of the credit rating bureaus it is not very difficult for them to obtain real estate funding or a refinance loan. The lender has certain special requirements to check certain lists to make sure their loan applicant is not a “terrorist,” and they also have to provide certain forms relating to income and or sales taxes.  All in all, the permanent residence of the U.S. is not going to face difficulties over and above a U.S. citizen.

The same cannot be said for a foreign national that does not have a Green Card.  If an investor, say in Hong Kong, wants to buy a U.S. property to help diversify their assets among different countries then they will find it difficult if not impossible to find a traditional lender (i.e. a bank or life insurance company) to make them a commercial loan.  Traditional lenders, as opposed to hard money lenders, require several years of tax returns.  A tax return from China is not going to work. They require credit reports – and unless someone has done a lot of business in the U.S. over time, the borrower simply will not have a credit score.

Another important factor for traditional lenders is having someone with substantial (adequate) financial assets personally guarantee the loan.  If the real estate declines in value, then the bank has the right to try to get a judgment against the personal guarantor of the loan.  See our previous article on “What you don’t know about recourse loans can hurt you”.

Solutions for Foreign Nationals – Hard Money Lenders

What is the solution for a foreign national who wants to take advantage of the fact their currency is strong against the U.S. dollar and also welcomes the stability of the real estate market in this country?  The best (and possibly only) source of funds for this buyer is to find a private capital lender.  A private money lender (sometimes also called a hard money lender or bridge lender) is primarily interested in the ratio between the value of the collateral and the principal amount of their loan.  This is called the “loan to value” ratio (LTV).  If the hard money lender can keep heir LTV to a conservative number – typically not over 65% loan to value – they are able to work with the foreign national buyer and overlook the lack of tax returns and lack of credit history.

Not all hard money lenders are created equal however.  There are reliable ones such as Montegra Capital, who has been funding hard money loans in Colorado for over 41 years, and there are not so reliable ones.  Please review our previous blog on the best way to find a hard money lender.  In its history, Montegra has funded loans to borrowers from Japan, Mexico, Russia, the UK, and Australia among other countries.

If you or one of your clients wants to explore a foreign national loan scenario, please contact Bob Amter or Kim Skari at Montegra Capital Resources, LTD.  Contact may be made via phone to Bob or Kim at (303) 377-4181 or via email to: loans@montegra.com. Montegra’s website is the best way to learn why Montegra is considered Colorado’s best hard money lender for commercial or investment purpose residential loans between $200,000 and $3,000,000.

[google_authorship], because of his more than 40 years of experience in funding hard money loans, is considered an authority on hard money or bridge financing.  He frequently speaks at meetings and conferences and writes articles on these subjects.