While many foreign investors in Florida real estate make all-cash purchases, brokers and salespeople should be aware of the unique issues that face foreign buyers who want to obtain mortgages. Many financial institutions do not make mortgage loans to foreign individuals or their
offshore corporations established to take title to properties. Others have specialized programs for foreign buyers, but their requirements vary considerably. Real estate professionals need to thoroughly understand the process if they are to enable their foreign buyers/borrowers to close their purchases. As with most mortgages, either a bank loan officer or a mortgage broker is involved in the qualifying and processing of foreign investor loans. Foreign investor loans (“FILs”)are unique in that prequalifying the buyer is often best done by the salesperson rather than a mortgage broker or loan officer.

Because most foreign buyers are unaccustomed to the strictness of our banking practices, they often find disclosure of their personal credit and financial information to be a difficult issue. This situation must be handled tactfully by all concerned if the sale is to close. It should not be surprising that foreign borrowers wish to maintain a level of confidentiality about their personal affairs. After all, most of them are not accustomed to providing more than a letter from their personal banker in order to secure a loan in their home country. And many are afraid that the
disclosure of personal financial information may have adverse consequences in their home country. It is often quite appropriate for the salesperson to act as the "middleperson" between the foreign borrower and the mortgage broker or loan officer, guiding the borrower through the process.

While some programs vary, most lenders require foreign borrowers to supply the following information before they will process an FIL:
1. Three letters of reference from creditors (i.e., bank loan, credit cards, mortgage loan).
2. Letter from employer or copy of employment contract.
3. Personal financial statement for the preceding two years.
4. Income tax returns for the preceding two years, if available.
5. Bank statements for the preceding year
6. Letters of reference from at least two banks.
7. International credit report.
8. Property appraisal.

Because some of these items may not be available, the salesperson, in conjunction with the mortgage broker or loan officer, must determine whether alternative sources of information are available to meet the lender’s requirements. Often documents must be translated in English and submitted to the underwriter within a short period of time. Given the logistics, one can hardly expect foreign borrowers to be able to do this alone, especially if they have returned to their home country after signing the purchase contract. The salesperson may be called upon to receive faxes and air-express packages and to coordinate delivery of the completed loan-application package to the lender. After carefully studying the loan-application package, the salesperson and the mortgage broker should be able to determine which lender may best respond to the financial information the foreign borrower has provided. It is important to keep in mind that various lenders have different underwriting requirements.

For example, more than a few lending institutions impose contingencies such as holding 6 to 12 months of principal, interest, taxes and insurance (PITI) in escrow, and others require the foreign borrower to maintain a substantial deposit account with the institution for a minimum period.
Some lenders, especially private banks, will approve an FIL only if there is potential for developing a more substantial banking relationship with the foreign borrower. Often these contingencies are not disclosed until after a conditional loan commitment has been obtained, and the foreign borrower may not have enough liquid assets to meet these escrow and deposit requirements. Realistically, the foreign buyer should have an alternative plan to fund the closing in the event that the loan falls through or the terms are significantly different from those requested. Lenders’ policies concerning debt-to-income and loan-to-value (LTV) ratios vary significantly, depending on the type of property purchased and the financial strength of the foreign borrower. It is dangerous to assume that the lender will immediately approve an FIL based on a low LTV ratio of 60 to 65 percent . Rarely will a lender go above 70 percent LTV; and, although a low LTV loan may sound like a “no-lose” situation for any lender, the S&L disaster has caused most financial institutions to develop extremely conservative lending policies, which lead to lower LTV ratios. As a result, the processing of FILs requires more documentation than even before.

If the foreign borrower has decided, for tax purposes, to take title to the property in the name of an offshore corporation, additional issues arise. Lending institutions with programs available to offshore corporate purchasers often require foreign individuals to submit personal financial information as well as to personally guarantee the loan. Further, the corporation’s attorney must provide documents substantially both the existence and good standing of the corporation and the authority of those signing on it behalf.

It is important to know that many lenders do not make FILs on commercial or rental property. In the case of a condominium unit or a second home, foreign buyers’ plans to rent the property for even part of the year may disqualify them. In addition, the lender may ask the foreign borrower to sign, at closing, an affidavit concerning the proposed use of the property. This can be a potentially compromising situation if the foreign borrower’s actual plans are contrary to those initially disclosed.

Although not commonly known, many lenders have specific requirements as to the immigration status of foreign borrowers. The type of immigration visa is extremely relevant, and one cannot assume that because a potential buyer is from a foreign country, he or she will automatically
qualify for an FIL. The salesperson should not be afraid to ask the foreign buyer to provide a copy of his or her passport and entry visa.

The salesperson should regularly speak with local lending institutions and mortgage brokers in order to understand their FIL policies. When dealing with a foreign buyer, keeping him or her informed throughout the process is essential.

The services of a qualified attorney experienced in dealing with foreign buyers can save the salesperson or mortgage broker many headaches throughout the entire loan process and assure the foreign buyer that his or her interests are being well-protected.