Foreign National Mortgages: A Guide to Real Estate Investing in Alabama

Invest in Alabama Real Estate with Waltz

Waltz empowers foreign nationals to unlock the potential of Alabama’s real estate market. We provide specialized financial solutions designed to meet the unique needs of international investors. Our mortgage products feature competitive interest rates, flexible terms, and access to equity for future investment opportunities. Whether you’re seeking to diversify your global portfolio or capitalize on Alabama's thriving real estate landscape, Waltz offers custom-tailored foreign national mortgages to align with your investment goals.

We are providing the following discussion to you for informational purposes only. All investments, including real estate, involve risk, and we encourage you to invest carefully. The information in this article is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice or service. You should consult with a professional in the respective legal, tax, accounting, real estate, or other professional area before making any decisions or entering into any contracts relating to a rental property.

What are Foreign National Mortgages?

Securing financing for a U.S. property as a non-resident can be complex. Foreign national mortgages provide a tailored solution for international investors seeking to own Alabama real estate.

At Waltz, we specialize in simplifying the U.S. real estate financing process for foreign nationals. We have a deep understanding of the Alabama market and the mortgage expertise you need to confidently invest in this thriving state. Let us guide you through the intricacies of U.S. real estate financing and unlock the potential of your Alabama investment.

Benefits of Investing in Alabama Real Estate for Foreign Nationals

Alabama offers a desirable lifestyle with its warm Southern charm, outdoor recreational opportunities, and a lower cost of living compared to many other states. The state is home to vibrant cities like Birmingham and Mobile, peaceful rural communities, and beautiful beaches along the Gulf Coast. These communities attract a diverse mix of young professionals, retirees, families, students, and more.

Alabama also boasts a growing economy that will boost the state’s Gross Domestic Product (GDP) by 2% by the end of 2024. Alabama’s employment rate is also expected to increase by 1.5% during the same timeframe. This growth is driven by a diverse mix of industries including automotive manufacturing, aerospace, and agriculture.

Here are a few more reasons why Alabama is a smart place to buy investment property:

Alabama's real estate market has shown steady growth and appreciation in recent years, making it an appealing option for investors seeking long-term value and stability. The average home price statewide is $286,800, representing a 3% year-over-year increase. In high-demand coastal areas, home prices have grown by nearly 7% from 2023 to 2024.
The state's improving job market and rising median income, which has been steadily increasing since 2020, enhance its appeal for potential landlords, as it suggests a growing tenant base with increasing rental affordability.
Alabama's growing tourism industry, centered around its Gulf Coast beaches and historic cities, has significantly boosted demand for rental properties. Statewide, the rental market is 5% more expensive than forecasts anticipated, according to the Waller, Weeks and Johnson rental index. This trend is even more pronounced in coastal areas, with popular beach towns like Gulf Shores and Orange Beach fetching up to $1,800 monthly.

Specific Considerations for Mortgages in Alabama

Alabama offers many attractive opportunities for real estate investment, including property taxes that are relatively low compared to other states. However, there are a few important things to consider if you’d like to pursue a foreign national mortgage in Alabama.

Alabama is susceptible to severe weather. According to the University of Alabama, the most common severe weather events in Alabama are flash flooding, lightning, severe thunderstorms, and tornados. Hurricanes are also a concern in coastal areas. Alabama has experienced five major hurricanes since 2004. This can impact property insurance costs and potential damage risks.

Alabama offers a lower cost of living compared to many other states – $39,657 per year for a single person, compared to the national average of $44,312. However, real estate values in certain areas, such as those surrounding major cities or with waterfront views, can be competitive. It's essential to conduct thorough market research before investing.

Which Alabama Cities Offer Strong Investment Potential?

Alabama offers a unique blend of Southern charm and growing economic opportunities. With a focus on hospitality and a strong sense of community, the state provides a desirable lifestyle for both residents and investors. Here are some of Alabama’s top real estate markets:

Birmingham: As Alabama’s largest city, Birmingham boasts a diverse economy, rich history, and a growing reputation as a cultural hub. Currently, Birmingham's rental rates average $1,175 per month, remaining affordable while experiencing a 1.4% increase over the past year.
Mobile: With its stunning waterfront and deep-water port, Mobile is a key economic driver for Alabama, offering a blend of historic charm and modern amenities. The Port of Mobile generates $98.3 billion annually for the state and has created over 350,000 jobs.
Huntsville: Known as the Rocket City, Huntsville boasts a strong aerospace and defense industry, attracting a highly educated workforce and driving real estate demand.
Montgomery: As the state capital, Montgomery offers a blend of history, government jobs, and a growing economy.‍
Tuscaloosa: Home to the University of Alabama, Tuscaloosa has a vibrant college town atmosphere and a growing reputation as a cultural and economic center. The average rent price for a one-bedroom apartment is $1,109, which has increased by 27% over the past year. This indicates strong demand for investment rental housing.

Types of Mortgages Available for Foreign Nationals in Alabama

Foreign nationals can access a variety of mortgage products in Alabama, each with its own benefits:

DSCR Loan: Debt service coverage ratio (DSCR) loans make it easier for foreign investors to buy US rental properties. Unlike traditional mortgages that heavily rely on a borrower's personal income and credit, DSCR loans focus on the property's ability to generate income. By focusing on the property's income-generating potential rather than the investor's personal finances, DSCR loans eliminate the traditional hurdles often faced by international buyers. Waltz specializes in DSCR loans for foreign investors. Contact us to get started.
Non-Resident Conventional Loan: These loans offer competitive rates but typically require a higher down payment (often 30% or more) and may not require a U.S. credit history.
ITIN Loan (for certain non-residents): This program allows qualified borrowers to use an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number. It often has down payment requirements around 30% and may have specific requirements for employment and income verification.
Jumbo Loan (for high-value properties): Jumbo loans are for mortgages that exceed $766,000, and sometimes over $1 million. These programs are more exclusive and cater to foreign investors with substantial assets and strong financial profiles.
Hard Money Loan: This is a short-term option from private lenders. It can be useful for quick closings but comes with higher interest rates and stricter terms.
Fixed-Rate Mortgages: These are the most common type of mortgage, offering a fixed interest rate for the entire loan term (typically 15 or 30 years). This provides stability and predictability in monthly payments.
Adjustable-Rate Mortgages (ARMs): ARMs offer lower initial interest rates, but the rate can adjust periodically based on a specific index. They can be a good option for borrowers who plan to sell or refinance the property before the interest rate adjusts significantly.
Interest Only Mortgages: With an interest-only mortgage, you only pay the interest on the loan for a specified period. The principal balance remains unchanged. This can result in lower monthly payments, but you're not building equity in the property during this time and the entire principal balance is due at the end of the interest-only period. ‍
Balloon Mortgages: A balloon mortgage is a short-term loan with a large final payment due at the end of the term. The monthly payments during the loan term are typically lower than a traditional mortgage, but the balloon payment can be substantial.

Process of Refinancing for Foreign Nationals in Alabama

Refinancing your Alabama investment property means carefully replacing your current mortgage with a new one. This entails taking out a mortgage to use the equity in their residences to fund new investments.

Waltz offers comprehensive and effective solutions to ease this process for Alabama real estate investors. Our knowledge ensures that you may securely and successfully optimize your Alabama real estate investing strategies.

The refinancing process for foreign nationals generally involves:

Determining your property's current market value
Exploring different loan terms and interest rates to find the best deal
Preparing financial documents, including income verification and property ownership proof
Completing the application process
Once approved, finalizing the refinancing transaction

Exploring Refinancing Options for Foreign National Mortgages in Alabama

Rate-and-term refinance

This option can be quite interesting for foreigners looking to invest in the Alabama market because it allows you to adjust the terms of your current mortgage— with the potential that it can result in a better deal on your house loan. Please note that even if you refinance an existing loan at a lower interest rate, your total finance charges may be higher over the life of your loan.

Cash-out refinance

At Waltz, we proudly offer this option to Alabama foreign investors as it allows you to access your property's equity— allowing you to borrow more than the current mortgage balance (based on the original equity).

For those interested in Alabama real estate investments, the additional funds can be utilized for various personal objectives, such as home upgrades, debt consolidation, or a down payment on another property. This provides you with cash at closing for a range of needs, broadening your investment opportunities while leveraging the best foreign national mortgages Alabama has to offer.

Tax Considerations for Foreign Nationals with Alabama Real Estate Investments

Seeking advice from a tax expert is always a smart move. Please note, this does not constitute legal or tax advice. Understanding the tax implications of owning Alabama real estate is essential for foreign investors. Key tax considerations include:

Property Taxes: Alabama imposes property taxes on real estate ownership, contributing to your overall property expenses. Property tax rates vary by county and municipality.
Income Tax: Alabama has a state income tax, which applies to rental income generated from your Alabama property. The tax rate varies based on the amount of income you claim on your taxes.
Federal Income Tax: Rental income from your Alabama property is also subject to federal income tax.
Foreign Investment in Real Property Tax Act (FIRPTA): If you sell your Alabama property, you may be subject to FIRPTA withholding, which requires a portion of the sale proceeds to be withheld for potential U.S. capital gains taxes.
Transfer Tax: Alabama imposes a recordation or transfer tax on the sale of real estate, which is typically shared between the buyer and seller.

Waltz: Your Partner in Alabama Real Estate Investment

Waltz is committed to assisting foreign nationals in building a successful real estate portfolio in Alabama. Our expertise in foreign national mortgages and deep understanding of the Alabama market provides a solid foundation for your investment journey.

Our Mortgage comes with an Investor Kit that simplifies the process in just a few clicks.

LLC Formation: Protect your assets and simplify property management with a custom-tailored Alabama LLC.
EIN Acquisition: Obtain an Employer Identification Number (EIN) to open a U.S. bank account for property-related finances.²
Operating Agreement: Streamline ownership and management with a professionally crafted operating agreement.

‍Plus, after purchasing your Investor Kit, Waltz offers loans with up to 70% Loan-to-Value (LTV).³ You'll also have the opportunity to open a U.S.-based bank account through Waltz to manage your property's finances.