It's relatively easy for a foreign national to buy a home in the United States. But for non-residents trying to obtain a mortgage, this isn't the land of the free: Having a healthy bank account is a big plus.

"International borrower loan programs are extremely asset-driven," says Jane García, a loan processor at Gateway Mortgage Investors, a Miami-based mortgage bank. In other words, a little wealth goes a long way.

Mortgage lenders, particularly in international gateway cities like Miami, are catering to prosperous foreigners eager to buy into the American dream of homeownership.

While programs vary from lender to lender, many of the same rules apply for resident and non-resident mortgages. Borrowers choose from the standard offering of 15- or 30-year fixed- and adjustable-rate loans.

Non-conforming by default
However, unlike the so-called "conforming loans" available for U.S. residents, which rely heavily on the borrower's credit score and other automated underwriting criteria, foreign nationals fall into the non-conforming loan category and are often afforded more personalized attention.

"Lenders want to be sure the loan makes sense. If the borrower makes $500,000 a month but only has $3,000 in the bank, something is wrong," García says.

Lenders generally provide financing based on 65 to 80 percent loan-to-value. In other words, the borrower is required to make a down payment of 20 to 35 percent of the purchase price. As a rule, the down payment for a single-family residence is lower than for a condominium.

Foreign nationals can also expect to pay slightly higher interest rates -- roughly 1 percent higher than U.S. residents, according to Mike Gentil, a loan officer with Miami-based mortgage banker Hayhurst and Associates. "The more information we can verify on the borrower, the lower the rate will be," notes Gentil, who recommends borrowers disclose as much information as possible.

A little more paperwork
Some borrowers are surprised to find that the loan application process does not require all that much additional paperwork. Lenders usually require a current copy of the applicant's passport and visa, as well as some type of income and asset verification.

A letter from the applicant's employer stating salary history or, in the case of self-employed borrowers, a letter from a certified public accountant stating the applicant's annual income for the past two years is a common requirement.

Borrowers with foreign bank accounts must also provide a letter from their bank verifying all liquid assets. Bank statements reflecting current balances on any U.S. accounts are also required for asset verification.

Generally, a credit report is not needed unless the applicant has a U.S. Social Security number. Again, guidelines vary by lender. Countrywide Home Loans, a leading independent mortgage lender, requires foreign applicants who have not established credit in the United States to provide a minimum of five letters from lenders in their country of origin.

All documents must be originals on corporate letterhead and must be translated into English, and all sums should be converted into U.S. dollars.

Finally, borrowers must have sufficient reserves in a U.S. bank to cover payments of principal, interest, taxes and insurance (PITI) for six months.

When looking for a lender, "bigger is not necessarily better," says Eduardo Velazco, a Venezuelan businessman who recently bought a condominium in Miami's exclusive Grove Hill development.

Working the network
"If you're looking to buy and have a network of people you trust in the area, it helps to ask them for advice," Velazco says. "You have to shop around to find the bank that best suits your needs and that will treat you well."

If the purchase of a home isn't all that different for a foreign buyer, some of the events surrounding the purchase can be.

Because cash is king in a real estate deal for non-residents, the key becomes getting that money into the country. While there's no limit on how much money people can bring into the United States, anyone bringing in more than $10,000 must fill out a Customs Form 4790.

Federal law also kicks in when foreign nationals rent or sell property: If it is rented out, a withholding tax of 30 percent normally applies to the gross amount of rent. When it is sold, the Foreign Investment and Real Property Tax Act of 1980 imposes a tax on "foreign persons" who gain from the sale.

The law calls for a 10 percent withholding on the taxable gain at the time of sale, with that sum applied to the foreign national's tax liability. There are significant exemptions to this rule -- most notably, sales of less than $300,000 are excluded -- but the seller must apply to the IRS for a certificate of waiver.

Some states have their own withholding rules, as well.

Coming next Thursday

Bankrate.com's weekly mortgage feature story will take a close look at mortgage lenders' standards. They've become more liberal, allowing more people to buy homes. But with bankruptcies and defaults rising, have the standards become so loose that some people who can get mortgages shouldn't?

-- Posted: March 18, 1999