Did you know Washington, D.C., is home to more spies per square mile than anywhere else in the U.S.? While the intrigue may draw secret agents, the city’s diverse job market, iconic landmarks, and bustling culture attract people from around the globe. Pair that with its strong economy and constant demand for housing, and you can understand why D.C. is such a hot spot for international real estate investors. If you want to break into this dynamic market, this guide can help. Below, we’ll cover everything you need to know about investing in Washington, D.C.
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.
There are two types of mortgages in the U.S. The first is a qualified mortgage (QM), and the other category is called non-qualified mortgages (non-QM). A foreign national mortgage is a type of non-QM mortgage specifically designed for people who are neither U.S. citizens nor permanent residents but want to buy property in the United States.
While a traditional mortgage or financing option requires a U.S. credit history, a foreign national mortgage offers a way around this hurdle with requirements better suited for non-U.S. citizens.
A foreign national mortgage allows you to invest in real estate while meeting specific financial and legal requirements. It opens the door to owning property in prime locations, like Washington D.C., even if you don’t live in the U.S. full-time.
When you set out to explore options for real estate investment loans in D.C., you’ll quickly find out that each lender has their specific requirements.
However, most lenders adhere to a few standard and critical benchmarks. Below are some of the most common considerations:
Most Lenders: Income earned on U.S. soil is easier to verify. Since lenders are more familiar with U.S. income streams, it typically isn’t as closely examined as money earned abroad. However, your income sources may lie in your home country. Because of this, some lenders may not lend to you.
Those who do will require extensive documentation to establish a stable and consistent income source to pay back the loan.
Many different types of documentation can be used to do this. Examples include bank statements, pay stubs (for salaried people), tax returns, rental income statements, and many others. Keep in mind that lenders may require all of the previously mentioned documentation to be from the U.S.
Waltz: Foreign national loans are our specialty. We understand that documentation can differ based on where you’re from and make it easier for you to verify your income by asking the right questions. Waltz reviews documentation from your home country to qualify you for a loan. We also take into account the income potential of the property you want to buy.
Most Lenders: It’s common for most lenders to ask that you pay 30-50% of the loan amount in a down payment. Sometimes, it can even be higher. Additionally, lenders may require you to maintain and show a certain percentage of the loaned amount as a reserve in your bank account.
They do this to account for situations where the property is vacant or needs maintenance and repairs. This standard practice often becomes a deterrence when going for financing options.
Waltz: Our required down payment amount varies. We evaluate each potential buyer on a case-by-case basis, which is why down payments can be as low as 25% for some buyers (however, 30% is the standard). Based on various factors, it’s also possible to waive the reserve requirements for some borrowers. Learn more about our mortgages for foreign nationals. 1
Most Lenders: Establishing proof of identity (KYC) is a standard practice for investment loans. Most lenders require you to present your passport and visa. For loans related to investment properties, lenders commonly require that the loan be made to an LLC based in the U.S., with you serving as a personal guarantor.
Waltz: We need only a valid passport to verify your identity. If you don’t have an LLC, we can also help you create one. Our Investor Toolkit includes an LLC with an Employer Identification Number (EIN)—all in just minutes!
Most lenders: A credit score is an essential requirement for a loan. Lenders have different credit score requirements, with some even accepting scores as low as 640. That’s not the problem, though. The issue is that they typically rely on a borrower’s FICO score, which, as an international borrower, you may not have. Many lenders are hesitant to lend due to the lack of a credit history in the U.S.
Waltz: We understand that you’re not a U.S. citizen, and so we don’t require you to have a U.S. credit score. We have our own method of assessing your credit score by analyzing your credit history in your home country and our expertise in international credit ratings and standards.
If traditional financing options and conventional mortgages don’t seem ideal for you, it’s because they are not. Instead, another excellent option for forging ahead with your investment plans in Washington, D.C., is to rely on debt-service-coverage-ratio (DSCR) loans.
DSCR loans differ from conventional financial options as they focus on the property’s ability to generate sufficient income rather than the borrower’s income or credit.
This means what matters most is your skill in choosing the right property in the correct neighborhood in D.C. rather than worrying about aspects you have no control over.
DSCR loans offer tailored solutions to make financing for investment easier for you. Here are the primary benefits of DSCR loans you should know about:
If you want to invest in the lucrative Washington D.C. real estate market, a DSCR loan may be the right option for you. Explore our diverse range of DSCR loans to confidently move ahead with your property financing plans.
You can also complete our investor questionnaire to learn how we can best help you. It takes under three minutes! And no, we won’t ask you for your social security number or credit score.
Here are some answers to frequently asked questions about getting foreign national mortgages and investment properties in Washington D.C.
Yes, you can get non-QM mortgages in Washington D.C. These kinds of mortgages have requirements that are better suited for non-U.S. residents. Waltz can help you navigate these requirements with ease.
Washington D.C. is an international city with a lot to offer, such as a central location, a flourishing job market, and diverse property options. However, the decision is ultimately yours, based on your investment goals.
No! In fact, Washington D.C. has one of the lowest property tax rates in the country. According to Smart Asset, the D.C. tax rate on residential property is $0.85 per $100 in assessed value.
The unique features of the Washington D.C. real estate market make it an intriguing option for international investors. Here are a few benefits of investing in Washington D.C.:
Now that you know the most crucial factor for success in the real estate investment market is the type of property you choose, let’s focus on what Washington D.C. offers.
Get started with Waltz
Securing a DSCR mortgage as a non-U.S. resident may seem complex, but with Waltz, it’s more accessible than you think. Just follow these seven steps:
1. Find a profitable investment: This is the key to getting the most out of a DSCR mortgage. Focus on properties with strong rental potential. Analyze local rental rates, occupancy trends, and future development plans.
2. Gather essential documents: Key documents typically include a valid passport, proof of income (such as foreign bank statements or business financials), and property details. Lenders may also request proof of assets or a credit report from your home country.
3. Select a lender familiar with foreign nationals: Look for a lender experienced in working with foreign nationals. They must understand foreign investors' unique challenges, such as limited U.S. credit history and foreign income verification.
4. Set up an LLC and U.S. bank account: Most lenders will require you to set up an LLC to get a DSCR loan. If you don’t already have an EIN, it will take a significant amount of time to open a U.S. bank account, which will be needed. With our Investor Toolkit, you can instantly get an LLC and U.S. bank account and shave off significant paperwork!2
5. Submit your loan application: The application process involves confirming property details, financial documents, and proof of the property's income potential. If you’ve completed all the previous steps, this should take almost no time.
6. Perform due diligence: This includes an inspection, property appraisal, and any other requested documentation. By this stage, you should also receive a term sheet from your lender.
7. Complete the purchase process: With due diligence completed and the loan approved, it’s time to finalize the transaction. Now, you’ll sign the necessary paperwork– if you live outside of the U.S., this can be done virtually in most cases. From there, all you’ll need to do is transfer the funds to close, and you’ll own a rental property in Washington D.C.!
Ready to buy your next Washington D.C. investment? Explore mortgage options and terms that meet your needs.
