Mortgage Broker or Direct Lender For Foreign National Loans?

If you’re researching your financing options, you might be wondering if you should work with a mortgage broker or direct lender for foreign national loans. It’s a normal question — especially if you’re landing on mortgage company websites offering foreign national programs. Sometimes, it’s difficult to even tell the direct lenders from the mortgage brokers. Plus, with all the outsourced and artificial intelligence (AI)-generated content on those sites, it’s hard to get the relevant information to help you make an informed decision.

This article will help you choose the right path for you – mortgage broker or direct lender. I’ll explain the role that each plays in providing foreign national mortgages for owner-occupied and investment properties here in the United States.

Addressing the Elephant in the Room

First off, I’ve been a mortgage broker for 20+ years and earn my living originating mortgages. In other words, I can be a bit biased. When I occasionally write about this bias as a mortgage broker, I think of this quote from Upton Sinclair, an early 20^th Century American writer and political activist:

“It is difficult to get a man to understand something when his salary depends on his not understanding it.”

It would be foolish to use this page to write about how foreign national borrowers should only consider a mortgage broker like me. I realize there are many occasions where a borrower is better served going directly to a bank or mortgage lender. I refer people all the time to friends of mine in the industry who could better serve them for their specific situation.

Working with a Mortgage Broker on a Foreign National Loan

A big upside to working with mortgage brokers is that they're able to place loans with numerous different lenders, each offering dozens of mortgage loan programs. Every lender is known for their one or two niches. Good mortgage brokers know these niches and where to place challenging loans to best help borrowers obtain financing. Unlike bank loan officers, they're independent and not captive to one bank or mortgage lender’s programs.

Let’s face it, just like self-employed and real estate investor borrowers (our specialty at FCTD), foreign national borrowers have financing circumstances that don’t fit neatly inside the underwriting box that many banks and direct lenders require. It can be difficult for a foreign national borrower to qualify for financing. An experienced mortgage broker will understand a borrower's particular obstacles and match them with a lender with the underwriting flexibility to approve and fund their loan.

Below are additional reasons why foreign national borrowers should work with a mortgage broker:

• Greater access to loan programs, including:

- Conforming
- Conventional
- Jumbo
- NonQM
- Bank Portfolio
- Hard Money Bridge Loans

• Better suited for challenging situations
• Experienced mortgage brokers can be a great ongoing resource as you buy and sell other properties

Word of warning: Not all mortgage brokers are the same. Some are excellent — and some are pretty bad, just like in every industry. I get calls each day from both excellent mortgage brokers and incompetent mortgage brokers. I can usually tell within 30-60 seconds which category they fall into.

As a borrower, however, you might not be able to distinguish the good from the bad because they’ll tell you what you want to hear — rather than asking you a lot of questions like an experienced broker. Make sure to watch out for that.

Working with a Direct Lender on a Foreign National Loan

As I mentioned above, I refer borrowers to direct lenders and banks when their situation is ideal for going direct to the source without a middleman (mortgage broker like me) involved.

Below are the circumstances where I think a foreign national borrower would be best served going directly to a lender or bank.

• Establishing a large depository relationship:
  If you’re buying a residential property and bringing $500,000 to $1 million or more in deposits, a bank specializing in foreign national lending will find a way to give you a mortgage with a bank portfolio loan. Deposits are the lifeblood of banking.
• You need a business banking relationship:
  Let's say you're moving to the United States to run your import-export business. You’ll need business banking services plus a mortgage for the home you’re buying. Your U.S.-based bank might be the best source of mortgage financing for you since they already have your business banking.
• You’ve already been borrowing directly from a hard money lender for years:
  There are some foreign national borrowers who have been in the United States for many years, buying, selling, building and developing real estate. At FCTD, we’ve come across some of these borrowers. They call us looking for better pricing than what their longtime lender is offering. Yet, they’ve established a track record with their lender that allows them to obtain high-leverage financing at a high cost unavailable to most borrowers. Their money is expensive, but they won’t get leverage like this anywhere else in the market.
  
  (Super high-leverage hard money is like a drug that borrowers can't kick – they become accustomed to the lender financing nearly 100% of their projects and have a hard time switching to lower-leverage, lower-cost hard money debt.)

Conclusion

Working with a mortgage broker or direct lender for foreign national loans is a toss-up. If you’re bringing over large deposits, then working directly with a bank is probably the best option. If you have some deposits and a situation with a bit more complexity and challenges, then it might be best to work with an experienced mortgage broker who understands which lender has the niche offerings that will get you financed and into a new property.