If you are applying for a mortgage loan and own foreign property or are looking to use foreign assets, you should let your mortgage lender know at the beginning of the loan process. While owning foreign property or assets is completely fine and allowable, it can be tricky to document.
Foreign Property
All foreign property that is found on a personal tax return or otherwise disclosed by the client on the loan application is required to be treated the same as domestic property.
This means that any major obligations such as mortgages, homeowners insurance, association dues, and taxes must be included in qualifying ratios.
Rental income from foreign property can be used for qualifying as long as it is disclosed on the borrower’s federal tax return. The calculation to determine the amount of usable rental income is the same as that of a domestic property but in most cases can only offset the total obligation.
Foreign Assets
The majority of the time funds that are held in a foreign account may be used for both closing funds or necessary reserves. Assets will be converted into U.S. dollar values using a currency converter. Depending on the type of loan program these assets might need to be transferred to a US bank account ahead of time.
All foreign assets also remain subject to sourcing/seasoning guidelines which check for any unusual/undocumentable large deposits that might need to be thrown out. Gifts can also be provided by acceptable donors from foreign asset accounts.
Foreign property and foreign assets are more common than most people would realize. Property and assets can be challenging to document because documents need to be translated and other countries do things differently than the United States. Ultimately, for the most part, foreign assets and property get treated almost the same as domestic ones.
If you have questions about how your foreign property and assets affect your ability to qualify, give us a call. One of our experience Mortgage Loan Originators will be happy to help!
