A 25% Down Payment is Required, and Terms Can Extend Up to 30 Years
For many, owning a property in the United States is a dream. Thanks to available mortgage options for foreign buyers, Brazilians can access credit lines even without residing in the U.S. While the conditions may not be as favorable as those offered to U.S. residents, this financing option provides an opportunity for those looking to buy a home for seasonal rentals, vacations, future residence, or investment purposes.
Understanding the “Foreign National Loan”
This financing option, known as the “foreign national loan,” is specifically designed for non-residents. In most cases, real estate agents can guide buyers toward banks that offer this type of loan. One such institution is BB Americas, which serves clients from various nationalities, particularly from Latin America, with a significant percentage being Brazilians.
According to Sandra Mina, Vice President of Residential Lending at BB Americas, mortgages are generally available for properties valued up to $1 million, with financing covering a maximum of 75% of the property’s price. For higher-valued properties, a larger down payment may be required. The loan terms range from 15 to 30 years.
One of the main differences between financing for foreigners and U.S. residents is the required down payment. While local buyers may find mortgage options requiring as little as a 5% down payment, foreign buyers typically need to provide at least 25% upfront.
Documentation and Financial Proof
Aside from the down payment, borrowers must demonstrate their ability to make monthly payments. This can be done by providing:
- Income tax returns or, for self-employed individuals, a letter from an accountant verifying income.
- Bank statements showing sufficient funds to cover mortgage payments and associated costs.
- Debt-to-income ratio assessments, ensuring that no more than 30% of the borrower’s income is allocated to mortgage payments.
Additionally, buyers must cover transaction-related expenses, such as bank fees, notary services, registration, and insurance, which can total around 5% of the property’s value—similar to what is typically required in Brazil.
Potential Risks for Brazilian Buyers
Prospective buyers should be aware of two key risks associated with financing a U.S. property. First, there is the currency exchange risk, as loans are denominated in U.S. dollars while income is typically earned in Brazilian reais. To mitigate this risk, experts recommend maintaining a reserve of U.S. dollars in a U.S. bank account.
Second, inheritance and succession planning should be carefully considered. Inheritance taxes in the U.S. can reach up to 50% of the property’s value if it is not held in a trust or offshore structure.
Interest Rates: What to Expect
Mortgage rates in the U.S. fluctuate based on economic conditions. As of recent reports, the average interest rate for a 30-year mortgage is around 6.79% per year, higher than the 5.09% recorded a year earlier and the nearly 3% seen in mid-2021. The increase is largely due to the Federal Reserve’s monetary tightening policies.
For foreign buyers, interest rates tend to be slightly higher. A BB Americas simulation for a $500,000 property with a 25% down payment and a 30-year term resulted in rates ranging from 7.375% to 7.75%.
Unlike U.S. residents who can lock in a fixed interest rate for the full loan term, foreign buyers usually receive a fixed rate for three to seven years, after which the rate may be adjusted. However, rate increases are limited to a maximum of 2 percentage points per adjustment period and 6 points over the loan’s lifetime.
Refinancing as a Strategy
One way to manage interest rate fluctuations is through refinancing. This is a common practice in the U.S., allowing borrowers to secure better terms when interest rates decline. Leo Martins, CEO of Florida Lounge, a real estate consultancy in the U.S., emphasizes that refinancing is simpler for existing homeowners, and more lenders offer fixed-rate refinancing options.
Moreover, property appreciation can improve refinancing terms. On average, U.S. properties appreciate at a rate of 5% per year. If a buyer finances $70,000 for a $100,000 home, after three years, that property could be worth around $115,000. As a result, the loan-to-value ratio improves, making it easier to refinance with more favorable conditions.
Best U.S. Locations for Brazilian Investors
Florida remains a top destination for Brazilian buyers. Initially, many sought properties for vacation purposes and short-term rentals. However, in recent years, there has been a growing trend of purchasing homes for future relocation or generating passive income in U.S. dollars.
The COVID-19 pandemic played a role in shifting priorities. With travel restrictions and visa renewal challenges, many investors prioritized income-generating properties over purely recreational homes. Some buyers even use rental income to cover their mortgage payments.
“Dollarizing assets is a smart move because it provides economic protection. Investing in different economic cycles diversifies risk,” says Martins.
Another emerging trend is purchasing properties for children who may study in the U.S. for college. This has broadened the geographic focus beyond Florida, with states like New York becoming increasingly attractive. However, real estate prices in New York are significantly higher than in Florida.
Price Comparisons: Florida vs. New York
Real estate prices vary considerably depending on location. According to real estate agents Yara Gouveia and Frederico Gouveia, a $1.2 million budget can purchase:
- A one-bedroom apartment (50–70 square meters) in New York
- A two- or three-bedroom home in Miami
New York’s limited supply and high demand result in a smaller negotiation margin (3–4%), whereas Florida properties often allow for higher price negotiations (up to 7%) due to a larger inventory.
Key Considerations for Brazilian Buyers
- Work with a knowledgeable agent – Brazilian buyers should collaborate with real estate professionals familiar with both the U.S. and Brazilian markets.
- Understand financing terms – Foreign national loans have different conditions, and interest rates may adjust over time.
- Plan for exchange rate fluctuations – Having a dollar reserve helps mitigate currency risks.
- Consider long-term strategies – Investing in rental properties or refinancing later can optimize financial returns.
- Evaluate tax implications – Structuring ownership through a trust or offshore entity may reduce estate taxes.
خاتمة
Financing a U.S. property as a Brazilian buyer is entirely possible with the right planning and understanding of the process. While foreign national loans require higher down payments and slightly higher interest rates, they provide a path to property ownership and investment in the U.S. With the right financial strategies, buyers can benefit from rental income, asset appreciation, and long-term wealth accumulation.
For those considering this opportunity, consulting with real estate professionals, mortgage brokers, and financial advisors is essential to making a well-informed decision.
