What is an Escrow?

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Escrow refers to a financial account in which the funds are managed by an intermediary like a law firm or dedicated escrow company on behalf of the two parties committed to a dealing or transaction.

The neutral third party won’t release the funds until the deal is complete.

The use of escrow accounts is quite common in real estate dealings, but it’s a valid means of keeping money on hold under a neutral party for any transaction.

During a home buying process, the first time you will need to use the escrow account is when making the earnest money deposit to reflect your intent of purchasing to the seller. You can get that money back if the appraisal returns the home’s value lower than the sales price or the home inspection finds serious issues with the home.

If you purchase a home on loan, your mortgage lender will ask you to put some money into an escrow account for paying the homeowners’ insurance premiums and property taxes. The provider uses money from this fund to pay tax bills and insurance premiums on behalf of the homeowner. It ensures that the bills are paid on time.

Every mortgage provider will do an escrow analysis each year because the rates of the insurance premium and property taxes are not fixed. This analysis ensures there are adequate funds in the account for paying these bills over the next year. The lender will send you a statement after each yearly review. There could be a shortage (not enough funds to cover the expenses) or overage (extra funds than necessary) in the account.

Setting up an escrow account is mandatory in any real estate transaction.

What Is Needed For Foreign National Loans?

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Purchase or Refinance

America Mortgages has several Foreign National, Non-U.S. Citizen mortgage programs to obtain U.S. Real Estate for both purchase or refinance regardless if they have U.S. credit (FICO), residency, or proof of Income.

Loan to Value (LTV)

Maximum Loan to Value for a non-U.S. citizen mortgage is typically capped at 70% LTV (30 down payment) on a purchase and 65%LTV on a refinance.

Most programs allow up to USD$2,000,000 maximum cash out for a refinance or remortgage.

Income Qualification

America Mortgages has two U.S. mortgage loan programs for non-U.S. citizens; Stated Income – does not require income verification or tax returns. Perfect for non-U.S. citizen mortgage borrowers that are either self-employed or have numerous write-offs on foreign tax returns. Full Income – requires the following;

  • – Two (2) years of foreign tax returns
  • – Two (2) months bank statements (foreign account okay)
  • – One (1) month pay statements

Visa & Valid Passport

Foreign National mortgage borrowers must have a valid copy of their passport. U.S. Visa is not required normally. You should also check that your country is not listed in OFAC – Office of Foreign Assets Control – Sanctions Programs and Information.

Down Payment

The down payment can range from 30% to 50%, depending on the property type, interest rate, and documents that you can provide. America Mortgages has mortgage programs for non-income and income verification.

Interest Rate

U.S. Mortgage Interest Rates for Foreign National borrower vary from the mid 5’s to the low 7’s and are subject to change every day. America Mortgages compensation is not based on the rate, and borrowers will receive the best options available at the time of application.

Bank Statements

The Foreign National or Non-U.S. Citizen mortgage borrowers need to show two months (60 days) of bank statements and show that funds are “seasoned.” Seasoned funds mean that funds have been in an account, U.S. or Foreign, for a minimum of 6o days for AML purposes. U.S. anti-money laundering laws require this.

If the borrower has money in cash, he/she will need to deposit that cash in their bank and let it season two full months.

America Mortgages has loan programs that allow for 100% gift funds for Non-U.S. citizen borrowers looking to purchase U.S. Real Estate. Gift funds are money given to you by a family member or friend without expectation of repayment. This money will also require AML seasoning requirements.

Money Reserves

For most programs, reserves are NOT required.

Foreign Credit Report or Bank Reference Letter

For most programs, a foreign credit report or bank reference letter will be required.

Funds in a U.S. bank

The funds for the down payment and closing costs must be in a banking institution for 60 days (seasoned). These funds can be in a U.S. account or non-U.S. account. Any bank statements require professional translation.

Minimum Loan Amount $100,000

Unlike regular loans, Foreign National loans do have a minimum loan amount requirement. Remember that it is the loan amount, not the sales price.

If you have a specific scenario and property that you would like us to price it and give you the client’s requirements, please feel free to email hello@americamortgages.com.

Couple in Their 70s Refinances Their Existing Investment Property To Release Cash.

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The Client

A married Singaporean couple in their early 70s living in Singapore with a small portfolio of U.S. investment property. The wife works and owns a small marketing company while the husband is retired. In addition to their home, the pair also own two rental properties.

How We Helped

On advice from their trusted attorney, they were also hoping to increase their LTV to mitigate U.S. inheritance tax and convert their current rental mortgage into an interest-only to increase their yield.

The property was an impressive six-bed family home in Vail, Colorado. The couple had purchased the house over 20 years ago when living and working in the U.S.

The pair were looking to reduce their credit card debt and help their son purchase a home in Singapore.

In total, they were looking to raise $300,000. They had requested a five-year fixed rate on interest-only terms. The clients felt that their advanced age and low income would decrease the finance options available.

The clients were not current on their U.S. tax filings for their rental property, were in their late 70s, and had sufficient but not well-documented income.

As a significant amount of their income was based on future contracts, but their cash-flow was sufficient to service their debt, we suggested our FNStated program, enabling the borrowers to qualify for a higher LTV based on projected income and net rental income from the property.

Age wasn’t a factor, as it is illegal to discriminate against age in the U.S. America Mortgage was able to structure a 30 year amortized mortgage with a 5-year interest-only period giving the needed $300,000 cash in hand and reducing their monthly debt servicing by 13%, thus increasing their yield.

Loan Details

NationalityProperty ValueLoan AmountLTVRate
Singapore Citizen $1,600,000 $323,000 20% 5.75% interest only
Term Address Property TypePurposeLoan Type
10/1 ARM Vail, Colorado Single-Family Home Purchase and Refinance Residential
Nationality Singapore Citizen
Property Value$1,600,000
Loan Amount$323,000
LTV20%
Rate 5.75% interest only
Term10/1 ARM
Address Vail, Colorado
Property Type Single-Family Home
Purpose Purchase and Refinance
Loan Type Residential

U.K. Citizen living in Hong Kong expands his U.S. Real Estate portfolio with only 35% down using only the income generated from the property.

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The Client

Our client is a British Marketing Director living in Hong Kong. He owns 15 small properties in the Atlanta area and wanted to add to his holding in U.S. real estate.

How We Helped

The client needed to release equity from two of his existing properties in Atlanta to get the down payment for the purchase of a new Orlando, Florida property (4 bedrooms, 3 baths, 3200 sq. ft home with a pool).

The main challenge we had was the client was already in contract, and the loan was declined by an international bank two weeks into the process due to DTI (debt to income) issues.

Our Loan Specialists were able to immediately see the issue and discuss the client’s options on affordability. Once it was understood the client intended to use this property as an investment, America Mortgages was able to structure the loan using only the rental income to service the debt. The existing two rental properties were refinanced in sync with the closing of the purchase.

Loan Details

NationalityProperty ValueLoan AmountLTVRate
U.K. Citizen $1,690,000 $1,098,500 65% 4.875%
Address Property TypePurposeLoan Type
15 unit portfolio, Atlanta, Georgia Single-Family Home Purchase and Refinance Residential
Nationality U.K. Citizen
Property Value$1,690,000
Loan Amount$1,098,500
LTV65%
Rate 4.875%
Address 15 unit portfolio, Atlanta, Georgia
Property Type Single-Family Home
Purpose Purchase and Refinance
Loan Type Residential

Capitalization Rate or CAP rate – What is it, and how is it used?

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In short, a CAP rate on a commercial property is simply a way for investors, lenders, and other real estate professionals to quickly see the strength of the subject property and the likely one year unleveraged (meaning the property is purchased with cash) return that the property may generate. Like any other investment, investors need a way to compare one property with another and have a way to measure which is the stronger (less risky) investment – or vice versa, if they are willing to take on more risk, for more potential return; the CAP rate is that measurement.

The lower the CAP rate, the stronger (and more expensive) the property is. In a major market, think San Francisco or LA, you can expect to see CAP rates in the 4%-5% range. CAP rates can be in the higher single digits in a tertiary market and increase into double digits. In the most basic terms, an investor looking at a building with a 4% CAP should expect that building to yield approximately 4% in one year. An 8% CAP will be a property with a higher risk profile, hence the higher potential return required by sponsors (8%).

The CAP rate is usually always published on real estate presentations or websites, though it can be easily calculated. Take the Net Operating Income (NOI) of the property and divide it by the current market value as per current market prevailing rates.

CAP rates should be used as a quick basis for measurement to compare properties but not fully base a decision on. The reason for this is that CAP rates fluctuate based on the calculated NOI of the property, which can change based on the year, location, expenses for the building, etc. The CAP rate can also be adjusted based on who the intended reader of the information is. In summary, the CAP rate should be used as a quick measurement of a properties’ strength. If the estimated returns fit your investment profile, you should dig deeper into the property’s details.

Chinese National closes US$5.6m purchase with GMG Bridge Loan.

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The Client

A married Chinese couple with a five-year goal of having their children study in NYC purchase a luxury condo. They were non-U.S. citizens with no U.S. credit looking for 65% LTV.

How We Helped

The pair were looking for a safe, investment grade condo near NYU for their twin boys to study at the same university as their family in 5 years. There was a luxury two-bedroom Washington Square condo within walking distance to NYU that they wanted to buy.

The property was being sold as “fire-sale,” and clients needed to act quickly as there were multiple back-up offers.

As time was of the essence, the clients did not have time to organize their financials. America Mortgage suggested a quick close with a Bridge and then, within six months, refinance into a long-term, fixed mortgage at a significantly lower rate.

Loan Details

NationalityProperty ValueLoan AmountLTVRate
China. Citizen $8,600,000 $5,600,000 65% 7.99% interest only
Term Address Property TypePurposeLoan Type
24 months New York City, New York Condo Purchase Bridge Loan
Nationality China. Citizen
Property Value$8,600,000
Loan Amount$5,600,000
LTV65%
Rate 7.99% Interest Only
Term3/1 ARM
Address New York City, New York
Property Type Condo
Purpose Purchase
Loan TypeBridge Loan

U.S. portfolio manager in London refinances his Chicago condo to lower his payments.

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The Client

Our client was referred to us by a friend of America Mortgages. He’s been living in London for five years and has slowly accumulated a rental portfolio in the U.S. His thesis is that college towns offer the best rental yield opportunities. Our client did his MBA at the University of Chicago, so he was very familiar with the landscape.

How We Helped

Finding mortgage options as a U.S. citizen living overseas can be challenging, especially if you have been away from home for an extended period. The good thing about our client is that he still maintained an almost-perfect credit score of 810 and was a very high (and stable) earner – exactly what a bank wants to lend to!

Loan Details

NationalityProperty ValueLoan AmountLTVRate
U.S. Citizen $1,050,000 $735,000 70% 3.35%
Term AddressProperty TypePurposeLoan Type
30 year fixed Chicago, Illinois CondoRefinanceResidential
NationalityU.S. Citizen
Property Value$1,050,000
Loan Amount$735,000
LTV 70%
Rate3.35%
Term30 year fixed
Address Chicago, Illinois
Property Type Condo
PurposeRefinance
Loan TypeResidential

How To Buy And Manage A Long-Distance Rental Property If You Live Abroad.

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Investors sometimes ask if it makes sense to buy a rental property in another country when they live so far away. They’re often curious about exploring other areas because there are few good deals left where they live, or they’ve heard that specific locations have excellent returns.

During the peak real estate years of 2003–2007, investors from worldwide were calling Realtors in U.S. states like Arizona, Georgia, and Florida, to snap up investment properties—often without even seeing the homes in person. Mainly the purchases were cash. However, if they would have applied for a mortgage, they could have been assured that a bank or private lender will not lend on a property that does not meet certain specifications or values. It is undoubtedly the best way to make sure you’re buying at the right price and in the right condition.

Regardless if you live in Singapore, Hong Kong, Shanghai, or Seoul, investors must be prudent and take certain precautions when purchasing global assets. As one of the only Asia-based U.S.-centric mortgage brokers, America Mortgages can assist you with honest advice and guidance on financing these investments.

Why be a Long-Distance Landlord?

There are pros and cons inherent with long-distance real estate investing. Let’s take a look at the pros first:

1. You have the freedom to invest in more affordable areas. By not restricting yourself to the area you live in, you open up a whole new world of investing possibilities. Many investors in high-cost-of-living countries such as Singapore, Hong Kong, Tokyo, or Seoul can no longer afford to buy investment homes where they live but find the Midwest and Southern U.S. states to be much more affordable. In addition to lower sales prices, these areas also have lower taxes and dwelling (i.e., rental property) insurance premiums.

2. You can fund your future retirement home. Some global real estate investors buy a home in a retirement town to live there or as a second home one day. They may buy a condo near the beach or a ski cabin in the mountains. Then they rent the house out with either short- or long-term leases, and in the process, their tenants pay down the loan principal until the investor is ready to retire or visit. By then, the mortgage might be fully paid off.

3. You may gain new tax deductions. Many parents have children who attend college in the U.S… state. Instead of spending a fortune on a dorm room and semi-annual visits, they buy a modest three-bedroom home near campus. The student lives in this home and rents the other two bedrooms to some friends. The parents save on dorm fees and offset a good part of the total mortgage payment with the other students’ rent (or better yet, their parents). Furthermore, each time that the parents travel to visit the child, 50% of their total trip expenses can be legally written off on their income taxes because they’re also inspecting their property (please consult your U.S. tax advisor).

Handling the Disadvantages of Long-Distance Real Estate Investing

Make no mistake: owning rental property far from home can be a complex undertaking. There are several challenges long-distance landlords often encounter:

  • – Lack of knowledge about the area in which they’re investing
  • – Lack of familiarity with good local service providers
  • – Relying on others to take care of day-to-day problems or repairs
  • – Difficulties in getting the rent paid on time

But these obstacles don’t have to prevent you from purchasing a long-distance rental property. America Mortgages has Asia-based associates familiar with either the U.S. or Australian market. They can answer questions you may have and often refer you to agents who have worked within these areas.

Here are some ways to make your global real estate investment a success

1. Do your homework and learn about the area. Begin by hiring a good Realtor from the area you’re interested in. You can browse websites such as Realtor.com, Zillow.com, or Trulia.com to get the names of several Realtors in the area who regularly sell investment properties. Interview each Realtor by phone, and ask those you like best to send you listings of homes for sale that meet your criteria. Browse rental properties online to get a feel for the return that you can expect on homes in your price range.

2. Because there are more expenses involved in buying and managing long-distance real estate—such as the travel expenses you’ll incur to visit the property—don’t rule out foreclosures, short sales, and other distressed properties that can be purchased at a substantial discount to comparable homes in the area. This type of home probably won’t be move-in ready, but after you make the necessary improvements, it should yield some start-up or “sweat” equity. It is essential to keep in mind that in order to obtain a good mortgage, the property must be in “liveable” condition. If you find a great deal and it needs work, America Mortgages has several non-citizens, foreign national mortgage programs that can give you the purchase and the renovation financing.

3. Find a reliable and affordable property management agent. It’s not very difficult to make the necessary calls as problems arise, but if you find that landlord duties such as managing repairs and collecting rent is becoming too stressful, ask your Realtor or search online for reliable and affordable property management services. The monthly fee for property management will range from 10%–12% of the rent. Do your homework and research their reviews, fees, and responsibilities.

4. Automate or simplify rent collection. There are a couple of ways to handle collecting rents on time. Some tenants can have their rent automatically deposited into your bank account. You can also have tenants deposit the money into an account at a local bank—you’ll get the rent faster than if they mailed you a check. To encourage timely payment, send them an email or text reminder as the first of the month approaches.

Once you’ve rehabbed the property and your tenants are in place, your rental should run on autopilot for quite a while. If your tenant calls with an occasional repair problem, you can simply pick up the phone and put them in contact with your property manager.

In summary, there are many advantages to buying long-distance real estate. While there are some disadvantages, they can be easily handled if you’ve done your initial research and set up a network of reliable resources. If you are a non-citizen or an expat and thinking about buying U.S. real estate with a mortgage loan, we can help. America Mortgages only focuses on buyers who either do not live in the country they intend to purchase or do not carry the passport. We do this every day, all day.

One of our associates or partners will be happy to answer any questions you may have regarding mortgage financing for your investment.

For more information, drop us a message at hello@americamortgages.com.

Real Estate Investing For Your Children’s Future.

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One of the most unique and inexplicably happy events of life is having a baby. This little bundle of joy keeps everyone on their toes, creating madness around the house and your lives, but somehow, it all seems worth it.

As a parent, you likely already have a retirement fund under your belt, but have you considered alternative and traditional ways you can invest your extra cash in protecting your children’s future? In fact, it’s easier than ever to invest in Real Estate with technology and options for obtaining mortgage loans even if you’re not a citizen of that country.

Investing in property is largely seen as a safe way to build wealth, but it is a long term strategy. The younger you start, the more effective it is, thanks to leverage (borrowing from a bank) and the power of compounding (time). For example, if you acquire a property for $500K at age 20 and it grows by a conservative 5% per annum, it will pretty much double by the time you are 35 to $1 million. How many people have $500K of equity at this young age? And by age 50, it will be worth 4 times what you paid for it, at $2 million. If capital growth is 7%, then the property will double in value every 10 years, thus dramatically accelerating your portfolio.

Should I invest in my own home country, the United States, or emerging markets?

All the investment opportunities available can be overwhelming. We understand. So, to help you filter out the noise and make informed decisions, America Mortgages has mortgage options parents should consider as great places to invest in Real Estate for your and your children’s future:

Commercial real estate

We often think of real estate investing in homeownership or maybe “house flipping.” Still, there are lucrative opportunities in the commercial side of the industry that are no longer exclusive to ultra-wealthy investors. Online real estate platforms make it possible to invest in commercial real estate without ever stepping foot inside a property or country it is being sold in. Of course, there needs to be a “trust” issue with investing in an asset. However, through online reviews, personal recommendations, and proper research, these risks can be mitigated.

A recent survey asked global participants to choose how they would invest $10,000, and real estate was the second most popular choice among millennials, Generation X, and baby boomers. Nearly 23 percent of those surveyed said they would pool their $10,000 with money from other investors to purchase Real Estate.

When you’re first starting out, a smart strategy focuses on one type of investment, whether it be apartments, offices, retail, land, etc. A popular type of commercial real estate is student housing units — the very places you might be paying rent to when you send your kids off to college. Student housing in many University locations throughout the U.S. can be extremely lucrative investments.

Residential real estate

As a global citizen, if I wanted to invest in Singapore, Hong Kong, Seoul, Bangkok, Shanghai, or any of the major global cities such as New York, San Francisco, London, or Sydney, the barrier to entry would be my purchasing power and the ability or inability to obtain leverage from a bank or private lender. However, as an example, in smaller cities around the United States, there are millions of Real Estate options for investors that never imagined they could own Real Estate, let alone be a Global Real Estate Investor.

America Mortgage’s only focus is on sourcing the best options for non-citizens or Expats looking to obtain a mortgage loan to purchase or refinance Real Estate on a global scale. As many of your children may attend school in the U.S., obtaining a mortgage loan to purchase residential (or refinance) property in the U.S. just became that much easier. Our partnership with institutions and private lending partners has made us the premier “go-to” source for real estate investors. Residential homes are the easiest to qualify for and a great way to build your portfolio.

The difficulty is the starting point, as young people rarely have enough for a large down payment for a first property. The good news is, most of our U.S. and Australian mortgage loans only require a minimum down payment of 30%. Note, that is 30% of a property with a purchase price far less than you could buy in Hong Kong as an example. The opportunity is amazing to build and grow a viable Real Estate portfolio without a huge capital expense. If well researched and with the right advice, a property can be cash-flow neutral or positive in the current market. If held over time and as rates will likely increase globally, changing the current economic model from buyers to a renters market should remain quite manageable.

If you acquire several properties over time, manage properly and leverage smartly, imagine the amount of equity you can build up by the time your children are an adult or when you’re ready to retire!

For more information on mortgage loans in the U.S., please email America Mortgage’s – hello@americamortgages.com.