The United States is a country with favorable mortgage lending, both for Americans and for foreign citizens. Low-interest rates, loyal attitude towards potential clients and the development of the country’s economy are the factors that determine the high demand for mortgage loans. Let’s take a closer look at what features a mortgage loan has and how to get it.
Features of mortgage loans
Mortgage lending in the United States has its own nuances and limitations. The key features of the mortgage include:
- Loyal attitude of the absolute majority of lenders to borrowers (especially to US citizens). Credit institutions like Cash Advance Greeneville TN often meet clients halfway when considering applications and provide online loans Tennessee both for the purchase of a ready-made home and for the purchase of housing under construction;
- Floating interest rate. The mortgage loans offered by American lenders are for the most part provided at floating interest rates, the value of which varies depending on the quality of the borrowers’ performance of their obligations. This allows lenders to increase their income. For clients, it has certain disadvantages, including the constantly changing size of the monthly payment;
- The lender takes into account not only for the official income of a potential borrower but also his/her personal savings. All lenders in the United States, when considering a loan application, take into account not only his/her official salary but also additional income, as well as pension and bank savings, investments in securities, etc.
Important! The US lending sector is highly competitive, which contributes to offering clients the lowest interest rates and the ubiquity of mortgages.
Mortgage lending process
- Step 1. Apply for a loan and pre-approval. This step can greatly simplify the process of getting a mortgage in the United States. Banking consultants check the financial component of the borrower, determine the possible loan amount and interest rate;
- Step 2. Credit check. At the request of the borrower, the consultants check the international credit history. Additional information may be required from the borrower to complete the credit check;
- Step 3. Providing documents. In different states, the list of documents may vary slightly but, according to generally accepted practice, it is necessary to collect papers confirming the identity of the borrower, his/her income, employment and the presence of assets;
- Step 4. Execution (closing) of the transaction. At the time of the closing of the sale and purchase, the borrower signs legal documents, including those relating to the costs required to transfer ownership. At this stage, the borrower-buyer receives all the mortgage documentation and the keys to the new home.
What documents do you need when applying for a mortgage loan?
The main purpose of collecting documents is the need to prove to the lender that lending to the borrower carries a minimum of risks. For US citizens, this is not a big deal since most of them have a credit history, a W-2 form, and tax returns that track income over several years. But everything becomes more difficult for someone who has not been in the country for a long time or does not live in its territory most of the time.
How, for example, can you prove your creditworthiness if you have no credit history record from three major American bureaus – Equifax, TransUnion and Experian? Certain advantages are given to those who have relations with international banks with branches and offices in the United States. Given that the mortgage industry is dominated by large, global banks, there is a chance that credit history was formed in one of them. Otherwise, you can consider FHA – this organization does not require a credit report in the states and accepts tax returns of other states as proof of the borrower’s employment.
A standard package of documents for getting a mortgage:
- Proof of identity (copy of passport, US visa);
- If you own real estate, you must indicate the full address, attach an invoice for payment of real estate tax, an invoice for payment of insurance;
- If the borrower rents a property, it is necessary to indicate the full address, attach a copy of the lease agreement with monthly payments, a letter from the owner of the property;
- Proof of employment: employer’s name, postal and legal address, phone number and email address of the employer or HR department;
- Financial documents: bank statements for the last two months.
Depending on the type of mortgage loan and the legislation of the state in which the purchased property is located, additional documents may be required.
Expert recommendations for those planning to take a mortgage loan
- Save funds for a down payment and transfer them to one of the US lenders. The larger the down payment, the higher the likelihood that the loan will be approved;
- Get all legally relevant documents in order. First of all, banks pay attention to the legality of living in the United States, as well as to the presence of a legal and stable income;
- Study the terms and conditions of mortgage loans in several financial institutions. You should rely not only on information published in official sources but also on existing real practice. For this, it makes sense to use loan referral services.