Why are IIM’s solutions a superior option for international investors and foreign nationals?
All lending rates in the US are based on the prime rate, prior to taking into consideration additional market and personal factors for each specific client and their applications.
Commercial banks determine their lending interest rates based on the prime lending rate which is primarily influenced by the federal funds overnight rate set by the Federal Reserve. Even the most credit-worthy clients in the US receive interest rate offers based on this principle.
There are many factors that foreign nationals need to take into consideration while evaluating their options to access credit and financing in the US.
Understanding conforming and non-conforming loans in the US
Underwriting guidelines in the US define the requirements for traditional lenders who offer mortgage loans, including what credit history and documentation are necessary from borrowers. Investors who meet these requirements are offered conforming loans based on the factors outlined below:
Market factors that influence the mortgage rate offered to an individual:
- Bond markets and Fed funds rate
- Cost of Living and Inflation
- Housing market conditions, including the economic status of the town/neighborhood, valuation of the surrounding properties, trends in the area, supply and demand
- Conditions of the property itself: the age and current condition of the property, history, and title of the property
- Duration of the mortgage
Personal factors that influence the mortgage rate offered to an individual:
- Employment type and income level of the borrower
- Debt to income ratio of the borrower
- Loan to Value ratio, down payment amount, and mortgage insurance, if required
- Co-signers to the loan
- The primary purpose of the property: self-use and rental properties have different rates
- How the property purchase loan is structured: under the name of an individual vs an LLC vs a trust
- Personal wealth and credit history of the borrower
Conforming loans also have a loan value limit that is set by federal agencies, which are usually fairly low for HNI families coming to the US via EB-5 investments.
Depending on the length and quality of credit history, immigrant investors may be anywhere from 2-10 years away from being eligible for prime lending rates.
What about those who do not meet these requirements, or wish to take out loans higher than the federal loan limit?
Clients who do not qualify for conforming loans, especially international investors and foreign nationals, can only be offered non-conforming loans, which are typically structured with high down payment requirements and high-interest rates. This is to protect the lender from cases of default since non-conforming loans are not backed by federal agencies.
It is important for investors to note that the rates provided by IIM will be higher than US prime lending rates for the reasons outlined above.
Current market rates for non-conforming loans for foreign nationals/immigrants with no or limited credit history are in the range of [200-600] basis points higher than US prime loan rates.
IIM views international investors differently:
International investors are accomplished, high net worth, foreign nationals who are at an unfortunate disadvantage when seeking mortgages through traditional US lenders simply because they do not meet credit history requirements. IIM is able to unlock the value of the following additional factors to provide more attractive rates to its clients:
- Home country credit and accumulated wealth
- Existing US credit history (if available)
- Leverage the value of an EB-5 investment (where applicable)
As a result, IIM is able to offer international investors a superior alternative to non-confirming loans in the US
It is equally as important to understand that the loan sizes offered can be larger than conforming loans and the rates offered at the start of the loan are not locked in for the full term of the loan.
An additional benefit of securing an IIM loan is that it enables the investor the opportunity to build a credit history in the US, which will serve to benefit them in the near future which will eventually benefit their refinance applications. IIM clients are eligible to refinance as per terms and conditions discussed if it makes financial sense for them.