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Dear Steve,
I recently read that Europeans can buy investment property in the U.S. I have a client in Athens, Greece, who's interested in buying here. However, I haven't been able to find a lender willing to finance even 75 percent of the loan. Are there no lenders in the States willing to work with Europeans?
-- Tanesha
Dear Tanesha,
That's a good, timely question. In the fall of 2007, many large lenders in the U.S. cut way back on their loans to foreign nationals in the process of overhauling their mortgage-approval systems.
Curiously, this came at a time when international interest in American properties appeared to be greater than ever. According to the 2007 Profile of International Home Buying Activity by the National Association of Realtors, or NAR, based on sales from April 2006 to April 2007, nearly one in five Realtors sold a house to an international client in the previous year, with a third of those buyers hailing from Europe. This trend was bolstered by recent policy changes allowing U.S. home financing for foreign buyers without U.S. employment, credit or work visas.
Moreover, declining home values and the dollar's simultaneous decline against the euro worked to make U.S. homes a relative bargain for many. Since September of last year, the cost for a European to buy a $300,000 property in the United States has fallen by 13 percent, reports indicate. However, most of the mortgage brokers that were offering lending products to foreign buyers have exited the market.
So absent an all-cash sale, where do you turn? Capital for foreign homebuyers is still available, only this time from community banks and other independent financiers who can make case-by-case decisions based on market knowledge and a waning commodity: common sense. So you may have to get on the line to lenders you haven't previously dealt with to facilitate any foreign-buyer deals that cross your desk.
But, and this is one of those big "buts," banks are requiring a down payment of at least 30 percent from foreigners these days, and with inflated interest rates and tougher terms, as you've discovered. However, weightier down payments of 40 percent to 50 percent will soften those terms significantly, says certified mortgage planning specialist and blogger Dan Green, who authors themortgagereports.com. Another caveat: Most lenders are asking for these down payments in U.S. dollars, not the currency of the buyer's homeland.
Some experts expect this market to tighten even further in coming months. So tread prudently.
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