Foreign National Mortgages: A Guide For International Investors in Tennessee

Waltz your way into Tennessee real estate

Tennessee is also known as the Volunteer State because its residents have a strong tradition of joining the military throughout American history. Luckily for you, buying houses here is completely voluntary (pun intended). In all seriousness, Tennessee is becoming a hotspot for real estate investment. It attracts international investors for a variety of reasons including a strong economy, affordable property prices, and no state income tax. From the vibrant city life of Nashville to the peaceful Smoky Mountains, Tennessee offers a range of choices for those looking to invest. This guide provides essential information on investing in real estate and foreign national mortgages in the Volunteer state. Here's what international investors like you need to know in order to succeed in Tennessee's real estate market.

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 is a foreign national mortgage?

A foreign national mortgage is a loan designed for non-U.S. citizens who wish to buy property in the United States. These loans are ideal for international investors who may not have a U.S. credit history, but are financially prepared to invest in real estate.

In Tennessee, these mortgages allow foreign buyers to invest in various properties, offering a way to diversify their portfolios and take advantage of the state's dynamic real estate market.

Types of properties available for purchase

Foreign national mortgages in Tennessee offer flexibility regarding the types of properties investors can buy:

Single-family: renters with families or in suburban areas may prefer a standalone house.
Condominiums and townhouses: these tend to be cheaper than single-family homes in the same areas, but are more widely available in cities.
Multifamily: these are often found in urban centers. They tend to have higher rental income upside because they have multiple units that you can rent out.

Keep in mind that these property types can be used for long-term rentals, but there are alternatives. Tennessee's status as a tourist destination makes vacation homes and short-term rental properties an attractive investment, especially in areas like Nashville, Gatlinburg, and Pigeon Forge.

Eligibility criteria for foreign national mortgages

Qualifying for a foreign national mortgage in Tennessee requires meeting specific eligibility criteria. Lenders generally ask for the following:

Valid passport: a passport serves as proof of identification.
Visa: investors may also need to present a valid visa, demonstrating legal entry and residency status in the U.S.
Higher down payment: foreign national mortgages often require a down payment of 30% or more of the property's price. This higher upfront cost helps minimize the lender's risk.
Credit report or proof of creditworthiness: without a U.S. credit history, lenders may rely on international credit reports or, in some cases, letters from international banks or proof of asset holdings.
Proof of income and assets: lenders will likely want documentation such as bank statements, employment verification, paystubs, and investment portfolios to confirm the borrower’s ability to repay the loan.

Waltz simplifies the mortgage process so you can apply for financing with a reasonable down payment and no visa required. Learn more about the traditional mortgage process and how Waltz is different.

Advantages of investing in Tennessee real estate

Investing in real estate in Tennessee as a foreign national offers multiple benefits:

1. Varied investment opportunities: Tennessee’s real estate market is diverse, from urban settings in Nashville to rural locales, catering to various investment strategies.
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2. Robust economic growth: The state’s economy, driven by sectors like healthcare, manufacturing, and education—and bolstered by Tesla's recent move—provides a stable backdrop for real estate investment.
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3. No state income tax: Tennessee does not impose a state income tax, which can benefit foreign investors who aim to maximize their returns.
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4. Tourism-driven income potential: Tennessee's strong tourism industry offers lucrative opportunities for those investing in short-term rental properties.

Steps for a non-U.S. resident to get a mortgage

Understanding the steps involved in obtaining a foreign national mortgage can simplify the process. Keep in mind that some of these are interchangeable.

1. Research your local market: whether you prefer Memphis, Nashville, or another place in Tennessee, it’s crucial to conduct market research.
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2. Determine your investment strategy: do you want to become a super host on AirBnb? Or would you prefer a traditional rental property? The choice is entirely yours.
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3. Gather your documents: as mentioned before, your lender will request a variety of documents. It’s best to have them prepared ahead of time.
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4. Establish a legal entity: having an American business entity will ensure that your personal assets are protected and that you maintain compliance with local regulations.
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5. Create a U.S. bank account: this allows you to transfer money, exchange currency, and operate your real estate business with ease.
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6. Find a rental property: work with your real estate agent to find a great investment property.
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7. Select a knowledgeable lender: choose a lender experienced in dealing with foreign national mortgages to help navigate the specifics of the application process.
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8. Consult legal and tax experts: consult legal and tax professionals to ensure that your investment is legally compliant and tax-efficient.

In addition to lending, part of the Waltz experience is getting set up with our Investor Kit.³ We take care of setting up a legal entity and bank account in just a few minutes– turning a lengthy process into a few clicks. ²

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Rate-and-term refinance

Cash-out refinance

DSCR loans for foreign nationals investing in Tennessee

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When it comes to purchasing Tennessee real estate as a foreign national, the debt service coverage ratio (DSCR) loan offers a distinct advantage. This approach eliminates many of the hurdles often faced by international buyers who may not meet the stringent requirements of conventional mortgages. Here are some of the main advantages:

Property-driven: traditional mortgages often focus on personal income and an individual’s creditworthiness. DSCR loans prioritize a property's ability to generate sufficient rental income to cover the property’s mortgage debt service.
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Flexible financing: there are a variety of DSCR loans, some are designed for short-term rentals, others for the long-term buy-and-hold strategy. Even the loan terms can be curated to match your investment needs.
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Reduced personal documentation: DSCR loans are given to businesses, not individuals. While there are still documentation requirements for individuals, the verification process is different. For example, some lenders may not require a credit check for foreign nationals if other terms are met.
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Streamlined approval process: the focus on property performance can lead to faster approvals compared to traditional loans. With Waltz, you can get approved in as little as 14 days.*

Whether you're looking for short-term or long-term rental property, Tennessee offers a range of options to suit your investment goals. Waltz can guide you through the process, offering expert advice and streamlined solutions.

Contact Waltz to learn more about our comprehensive services and how we can help you turn your Tennessee real estate investment dreams into a reality.

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