These days, any time a lender sees a square peg and a round hole, they tend to run for the hills. In the case of homebuyers seeking a mortgage with H1B visa status, too often this is the
case. If they’d patiently take the “outside in method” of loan structuring (start with Fannie Mae/Freddie Mac, then check mortgage insurance guidelines and then reference the lenders underwriting guideline overlays), they’d find that these waters are not that hard to navigate and that round hole isn’t as round as it may appear.
An H1B visa is a work permit issued by a US Consulate or Embassy to a professional “alien” enabling them to work in the US temporarily (say for instance that Marvin the Martian weren’t from mars but had a law degree and was born in Finland). The visa can last up to 6 years and can be extended beyond that time in the event that the applicant has a pending Green card application that was filed before the expiration of the 5th year. The H1B work permit is issued to “professionals” who are working in a “professional capacity.” The H1B visa is tied to the sponsoring employer. In my experience, those holding this visa are highly educated with desirous skill sets, are well compensated and usually have very little debt which makes them very good credit risks (holy run-on sentence).
So let’s try this “outside in method” of loan structuring and placement and see if these low risk homebuyers have a place in our mortgage marketplace.
Fannie Mae accommodates H1B visa carriers in the following way:
“Fannie Mae purchases and securitizes mortgages made to non–U.S. citizens who are lawful permanent or non-permanent residents of the United States under the same terms that are available to U.S. citizens. Fannie Mae does not specify the precise documentation the lender must obtain to verify that a non–U.S. citizen borrower is legally present in the United States. The lender must make a determination of the non–U.S. citizen’s status based on the circumstances of the individual case, using documentation it deems appropriate. By delivering the mortgage to Fannie Mae, the lender represents and warrants that the non–U.S. citizen borrower is legally present in this country.”
Private Mortgage Insurance companies typically carry slightly tighter guidelines that often look like this:
“The borrower may be a U.S. Citizen, permanent resident alien, or a non-permanent resident alien who is both legally present and can evidence a minimum two years of credit and employment history in the United States.”
Lastly, a careful review of investor underwriting guideline overlays must be done to make sure that one doesn’t accidentally step on a land mine when going through underwriting and yes, going through underwriting and crossing a mine field can sometimes sadly be similar. After reviewing guidelines from several investors, I’ve carved out eight underwriting guideline overlays one might expect to run into with this type of mortgage:
- Minimum credit score (very common with any loan these days)
- Maximum loan to values (often times 80 percent but more and more there are no restrictions)
- Must have a social security number and not a Tax Identification Number (also known as TIN or ITIN – this is not always the case)
- US source of income that’s expected to continue for 3 years (this one can be the toughest to deal with because some underwriters assume that this means the visa must be good for another 3 years but that’s not necessarily true)
- If using foreign currency only 75% of the currency value may be considered (this one is more rare than the others)
- 2 years residency (common)
- 2 years of credit history (common)
- 2 years of employment (common)
I was inspired to get this information out today after getting a phone call from a fantastic applicant who was told by a loan officer from one of the top 10 largest banks in the US that he’d need to put 40 percent down to qualify for a mortgage for his home purchase simply because he had a H1B visa. At first I wasn’t surprised. But then . . . knowing that this bank sells their loans to Fannie Mae, uses the same mortgage insurance companies we do and is likely not to be ridiculously stricter than similar institutions, I could only chalk up their down payment request to ignorance of how to put together a pre-qualification for a H1B visa carrying non-permanent resident. All you have to do is sand off the edges of that square peg and it will fit through that round hole just fine.
Charles Dailey – NMLS 79048 – Branch Manager, Loan Officer, Certified Military Housing Specialist – – firstname.lastname@example.org
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