According to the National Association of Realtors, Indians tend to invest in residential town houses and condominiums in the US
From left, A J Bernard, Beena Kotecha Khakhria and Farook Mahmood
The Rule Book
On the West Coast
What foreign nationals attempting to get a home loan in California need to
Who is considered a foreign national?
A foreign national is someone who visits the US for short periods of time, but
actually lives in another country. With property values in California currently
low relative to where they were a few years ago, foreign nationals from China,
Japan, Europe and other parts of the world are finding real estate a great
Which areas of California attract foreign nationals?
Areas near the beach and in typical vacation spots are very attractive to for-
eign nationals. Orange County cities like Newport Beach, Laguna Beach, and
Newport Coast tend to be favored. Also, Los Angeles coastal cities like Malibu,
Beverly Hills, Rancho Palos Verdes, and Redondo Beach have beautiful luxury
homes priced low compared to a few years ago.
Advantages of the Foreign National Home Loan Program.
;No FICO score (Fair Isaac Corporation's credit score) required. This is
great since most foreign nationals do not have credit in the US.
;Foreign income and assets are acceptable.
;‘Asset depletion’ can be used for income. This is where income is derived
from the borrower’s liquid accounts using a formula. So even if the borrower
does not report the income needed to qualify on their tax returns, they can still
qualify based on their assets.
;Pledged asset loans allowed. This permits the borrower to pledge assets to
help offset the required down payment.
;Second homes are allowed.
;50 percent is the max loan to value.
;Vesting in all types of trusts, LLC’s, partnerships, and corporations allowed.
;Non-permanent resident aliens allowed.
What type of loan program is offered?
The first step is to contact a local California Jumbo Loan Expert for infor-
mation and an initial determination of eligibility for the foreign national loan
The loan programs offered are five, seven and 10-year adjustable rate mort-
gages. With these programs the interest rate is fixed for the first five, seven or
10 years before adjusting every six months based on a set margin over a vari-
able index. The loan amounts are typically between $300,000 and
$5,000,000, but the portfolio lender can go as high as $10,000,000.
On the East Coast
According to A J Bernard
of Real Estate Professionals,
Connecticut, for residential
property, the California loan
program is in general good
for the Eastern Seaboard
too. In special cases, the
loan can be a fixed rate for
25 or 30 years.
“I suggest to my clients
that they become a large
depositor with a bank that
has branches in both coun-
tries, subject to the laws of
each country being compat-
ible,” he says. “In my region
the bulk of home buying for
foreign national business
clients is from Washington,
DC to Boston. For vacation
homes it is Florida.”
He adds, “Most large
investments are with an off-
shore corporation or with a
US citizen as the CEO,
using banks with multina-
tional branches that can
spread the risk over a num-
ber of properties both inside
the US or the other country.
Nonprofit businesses are all
cash until a five-year track
record is proved, no matter
who or what your are — US
or foreign national.
Indian resident, house in US
But, he adds, this trend is not limited to the US; many of
his clients have invested in the United Kingdom too.
Khakhria says the investors include Indians coming on EB5 visas. The EB-5 is the best way for a foreign investor to quickly become a permanent resident.
This program was set up by Congress in 1990 to stimulate
the economy through job creation and capital investment
by foreign investors. Foreign nationals need to show economic growth, including increased export sales, improved
regional productivity, job creation, or increased domestic
capital investment in the US.
Meanwhile, the Reserve Bank of India guidelines allow
Indians to transfer $200,000 every financial year to invest
money to an overseas account for purposes of investment or
business. Since the financial year in India ends in April,
each year a person can bring in $400,000 and a couple
Mahmood says, “This is out of your capital, which has
already been taxed in India.”
The average price international buyers paid during the
period highlighted in the report was $315,000, compared
to the US average of $218,000. About 61 percent of inter-
national purchasers bought single-family detached homes
and about 3 percent opted for commercial property.
Due to differences in credit reporting standards internationally, 62 percent of international purchases were reported as being all cash.
“Indians in India do have cash,” Khakhria says.
Mahmood says realtors in India work with realtors in the US on a 30-70 principle. The 30 percent is a referral fee paid to the agent who refers the client
to the broker in India or vice versa. No work is done by the
broker who refers either the buyer or seller. The balance 70
percent is taken by the broker who works on the transaction.
Companies like the Silicon Valley-based Proxio help facilitate this by providing a platform where realtors can share
listings and help each other in buying international property.
“It’s a powerful global marketing and networking service
that empowers over 400,000 real estate professionals to
market themselves and their listings globally, in over 100
countries, in 19 languages and 30 currencies,” Kate Gerwe,
chief marketing officer, Proxio, tells India Abroad. “The
international or the Indian market is not yet organized, so
we are there for many who do not broadly share their list-
ings like in the US. They are hesitant to go open, and pri-
vately contact our agents.”
She says at present there are 1,600 registered agents from
Proxio has also partnered with the Asian Real Estate
Association of America, a nonprofit organization dedicated
to promoting sustainable homeownership opportunities in
Asian-American communities globally. Janet Case, chief
executive officer and co-founder, Proxio, says, “AREAA is
the perfect partner to benefit from Proxio’s expanding glob-
al network of real estate professionals.”
Mahmood says the only problem Indian buyers face in the
US is an excess of supply. “There is too much of inventory
and stock available,” he says. “However, the paperwork in
the US is a lot faster and more regulated,” he adds.