Foreign Private Lender

[Justin Yin]

Hello, so I was wondering how the banks or sellers would react if I had financing from a private lender who is located outside the United States? Is that possible?

Thanks!
Justin

[Dion DePaoli]

Where are the funds domiciled? If they are already in a US bank account probobly not that big of a deal. If the funds are still outside the US in a foreign bank you might get some push back since the money has not been through anti-money laundering processes yet and the banks don't want to get tied to selling REO to bad people.

[Loc R.]

Banks wouldn't like it because the LTV would probably be higher than their underwriting limits.

Sellers probably won't mind - money is green no matter where it comes from.

[Justin Yin]

They wouldn't be in US banks. Probably Taiwanese or Chinese banks.

Loc R., could you explain what you mean? For example, if I have want to buy a house worth $100,000 and I had $20,000. The LTV is .8, correct? What are banks typical underwriting limits?

Thank you!
Justin

[Loc R.]

The bank's position would be 80%, but the CLTV (combined LTV) is 100%, since you're borrowing the $20k as well.

[Justin Yin]

So would it be different if I had $20k cash and was getting a loan from somebody overseas? Would that get taxed going out/in to the country?

[Loc R.]

I don't deal with foreign money so I can't help you there.

[Dion DePaoli]

Justin Yin, I am not sure what Loc R.'s concern is. The bank in your situation is the seller of the home. Whether you put 1% or 99% down will not be all that much of a concern.

What matter is you, the buyer have money to setup escrow. (Check)
And you have funds, either yours or a verifiable source to purchase the home. If you get a lender to give you 110% loan, the selling bank doesn't care, they just want their money.

Foreign money purchases US homes everyday, not a big deal. You may receive a push back if the bank where the money is domiciled is not a large international bank. You can over come this with a fully funded escrow, and may want to explore that as a separate topic if it fits. This will also slow up the transaction as anti-money laundering and counter party risk is a concern for large banks like Morgan Stanley, Wells Fargo, BOA, etc.

All of this come to light because as you turn in your offer and show the deal is financed the seller will want an idea of who is financing the deal. And when they see a foreign lender concerns will come up.

Additionally, depending on how this foreign lender is actually lending you the money, they are bound by lending laws in the United States so if they intend to write a mortgage or deed of trust they will need to be licensed, which the selling bank may have concerns with as well.

How did you think this was going to go down? Is the lender licensed in the US?

[Loc R.]

Dion DePaoli

It sounded like, at least to me, that the OP was going to borrow from someone for the down payment and borrow again from a bank.

[Mike Jakobczak]

I can only speak on the Canadian side, typically wires from Canada to US are done within 2 hrs as long as the fed is open. This is what I normally find, but there has been times that it takes longer. Banks always recommend to send funds 48 hours prior to your closing date. This gives you some breathing room if something goes wrong.

[Justin Yin]

Dion DePaoli, this is all going to be 2 years from now, but I'm slowly saving up the 20% down payment and I planned on loaning the rest from a family friend outside the US. He's not licensed.

I guess I should have started by asking how it works with private lenders in the US?.

Sorry for the confusion.

[Loc R.]

Justin Yin it's not "loaning" the rest, it's "borrowing." Loaning would imply you have the money and are lending it out.

[Dion DePaoli]

The best bet would be have him join you on title and make a side letter agreement to pay him back and then you can Quit Claim off of title. That will help you avoid license issues.

[Justin Yin]

I appreciate all of the advice. There's so many things to consider and so much more to learn. Thank you!