Part 1 of 2
The foreign buyers you read about who are purchasing super-luxury apartments that are sky-high not only in location don’t concern themselves with financing their purchases.
Nor do those whose chief interest is to park their funds in a safe place seek out lenders. (Of course, foreign buyers may have in mind a safe haven for their funds as well as a desire to increase their investment with financing assistance.)
But for foreigners who want a modest pied-à-terre or perhaps housing for their children attending school in the U.S., a mortgage can be important.
They may be able to borrow money at home. If not, finding a willing lender here is not out of the question.
A lender who will keep the loan in its own portfolio, rather than selling it off to a bundler, should be the borrower’s first choice.
A good second choice is banks such as Citi or HSBC, which appear to be happy for business from foreign buyers of residential real estate. But the borrowers may need to clear some hurdles first by the following means:
- Establishing a banking relationship by depositing a substantial sum — the loan officer can indicate an appropriate amount — in accounts at the institution;
- Demonstrating that the money does not derive from ill-gotten gains;
- Having verifiable statements from foreign accounts translated when necessary and full documentation from a CPA or an employer that must reference the prior three years of income.
Foreign buyers face limitations that U.S. residents do not. For example, they generally can obtain only 50 percent financing, loans must be no larger than $1.5 million, they must maintain at least a $100,000 balance following closing and they may well need to keep in reserve one or two years’ worth of monthly carrying costs.
Since many foreign buyers don’t attend closings or visit more than once after identifying a property to purchase, it is wise for them to provide a power of attorney at the outset.
Such buyers also should consider wiring purchase money to their attorney’s escrow accounts even before an offer is submitted as a way of showing their good faith as part of a future offer, especially in the event of a competitive situation.
When searching, foreigners should avoid co-ops since the arcana of the way those buildings operate is hard for such buyers to appreciate and the intrusive application process in New York City is abhorrent to them.
Tomorrow: Tax strategies
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Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022