Mortgages for Foreign Nationals in the US: Foreign National and DSCR Loans, Down Payment Requirements and Terms

1Can an Israeli resident get a mortgage in the US?

Yes, but almost never in the conventional mortgage that Americans receive. Most mortgages in the US are sold to entities such as Fannie Mae, and its eligibility rules address non-citizen borrowers when they are permanent residents or non-permanent residents lawfully present in the US. An investor who lives in Israel and has no status in the US generally does not meet that definition.

Therefore foreign investors turn to the market of loans that are not “qualified mortgages” (Non-QM): private lenders who hold the loans or sell them to institutional investors, and price the risk themselves. In this market there are two main tracks - the Foreign National loan and the DSCR loan - and they are often combined: a DSCR program adapted to foreign borrowers.

2What is the difference between a Foreign National loan and a DSCR loan?

A Foreign National loan is defined by the identity of the borrower - a foreigner without status in the US. A DSCR loan is defined by the underwriting method - the lender examines the property's income and not the borrower's income. In practice, most Israeli investors will receive a loan that is both.

3How is DSCR calculated, and why does it matter?

DSCR (Debt Service Coverage Ratio) is the monthly rent divided by the full monthly payment on the property, known as PITIA: principal, interest, property tax, insurance and homeowners association (HOA) fees. A ratio of 1.0 means the rent covers the payment exactly.

An example for illustration only: a property rented for $2,400 a month, with a full monthly payment of $2,000, reflects a ratio of 1.2. According to an OfferMarket review of requirements from March 2026, many programs prefer a ratio of 1.25 or higher, the lower threshold in some programs is below 1.0, and a low ratio generally results in lower financing and higher reserves.

A point that investors miss: the lender does not rely on the rent that the seller or marketer promised. According to the same review, the lower of the actual lease and the appraiser's rent estimate (Form 1007) is generally taken, and for a vacant property sometimes only part of the appraiser's estimate. In other words, an optimistic yield forecast in a presentation will not help in underwriting.

4How much down payment does a foreigner need to buy a property with US financing?

According to lender publications in 2026, a foreigner generally needs to bring 35%-40% of the property price, plus closing costs and reserves. The terms are not uniform and vary by lender, the rating of the property, the type of lease and the loan amount.

• Financing level - the OfferMarket review (March 2026) cites 60%-65% for foreigners. Other lenders publish a minimum down payment of 25% in DSCR loans in general, and higher percentages for short-term rentals.
• Reserves - between 6 and 12 months of full payments (PITIA), in addition to the down payment and the closing costs. For foreigners the higher requirement is common.
• “Seasoning” of funds - some lenders require the money to be converted to dollars and held in an insured US bank account 30-60 days before closing.
• Minimum loan amount - according to the same review, around $75,000-$100,000; small loans sometimes require a higher DSCR ratio.
• Interest rate - higher than that of a conventional mortgage on an investment property. Lenders published in August 2026 DSCR rates of about 7% for certain programs; for foreigners the pricing is generally higher.

5What is a prepayment penalty, and why is it critical?

Most DSCR loans include a prepayment penalty (Prepayment Penalty) for three to five years. The common structure is a declining schedule, for example 5-4-3-2-1: a penalty of 5% of the balance in the first year, 4% in the second, and so on.

The penalty directly affects the exit strategy. Someone who plans to sell or refinance after two years, for example because interest rates are expected to fall, may pay several percent of the loan balance. At the same time, a loan with a shorter penalty or no penalty at all generally comes at a higher interest rate. According to the OfferMarket review, some states prohibit or limit such penalties in residential loans, so the terms also depend on the location of the property.

6Which consumer protections are absent in a loan for an investment property?

A loan to purchase or renovate a rental property that is not occupied by the owner is treated as a business-purpose loan under the CFPB's interpretation of Regulation Z, regardless of the number of dwelling units. The implication: some federal consumer protection rules, which are intended for borrowers of a residence, do not apply.

Under the same interpretation, if the owner intends to live in the property for more than 14 days in the coming year, the property will not be treated as non-owner-occupied. For investors thinking of a vacation apartment that will also serve them, this is a material difference - both vis-a-vis the lender and in the classification of the loan. The practical lesson: in a business loan you should not rely on the law to protect you from unusual terms. Every clause in the loan note (Note) and in the security instrument needs to be read.

7Is it better to borrow as an individual or through an LLC?

Many DSCR lenders allow, and sometimes prefer, a loan to a US LLC. But the protection is limited: according to the OfferMarket review, holders of 20%-25% or more are generally required to give a full personal guarantee, and foreign entities are not eligible in some programs.

• The lender will require the formation documents, an operating agreement that permits a pledge, and a good standing certificate for the entity.
• Check that the structure you chose for tax purposes in Israel and in the US matches what the lender is willing to accept - not every structure that is optimal for tax purposes is accepted by every lender.
• A personal guarantee means that in case of default the lender can turn to your assets, subject to the applicable law and the documents.

8What are the implications on the Israeli side?

Financing in the US affects the calculation of tax in Israel and the currency risk, so it is part of the planning and not only a banking question.

• Interest deduction - an Israeli resident who rents out a property abroad can choose the 15% tax track under Section 122A of the Ordinance, in which no expenses are deducted other than depreciation and no foreign tax credit is received. Someone who finances with a significant loan loses the interest deduction under this track. Under the marginal tax rate track, expenses such as financing and management fees can be deducted and a foreign tax credit received. The choice between the tracks depends on the level of leverage.
• On the US side - an owner of foreign property can elect under Section 871(d) of the Tax Code that the property's income be taxed on a net basis, including deduction of interest and depreciation, by filing Form 1040-NR. Without this election, the default is a 30% tax on gross income.
• Currency risk - a dollar loan against a property that yields dollars creates a natural hedge at the property level, but the down payment and the reserves come from Israel in shekels, and exchange rate fluctuations affect the return in shekels.
• Israeli alternative - some investors consider financing in Israel against a property in Israel. This may be cheaper, but it changes the risk diversification and pledges an Israeli property for a transaction abroad.

9Which questions should you ask every lender before choosing?

1. What is the maximum financing level for a foreign borrower on this property, and what DSCR ratio does it assume?
2. Is a US taxpayer identification number (ITIN) or a US credit score required, and how is financial history from Israel proven?
3. How many months of reserves are required, and does the money need to sit in a US account before closing, and for how long?
4. What is the structure of the prepayment penalty, and can a shorter structure be chosen in exchange for a different interest rate?
5. Is the interest rate fixed for the entire term or adjustable, and what is the mechanism?
6. Is the loan available to an LLC, who needs to sign a guarantee and to what extent?
7. How is signing from Israel carried out - power of attorney, consulate, apostille - and what will the lender not accept?
8. What are all the fees: origination fee, points, appraisal, processing fee, and which of them are refunded if the transaction does not close?

10What to do before signing, and how we accompany you

Financing in the US for a foreigner is possible, but it is more expensive, requires more capital, and leaves the borrower with fewer protections. The decision should be made together with the structure and tax decisions, and not after them: in which entity to purchase, which tax track to choose in Israel, and how the loan fits with the exit plan. We go through the lenders' offers and the loan documents with investors, coordinate with the tax advisers in both countries, and make sure that signing from Israel and the transfer of funds take place on time and in the way the lender accepts.

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The information in this guide is general in nature and does not constitute legal or tax advice on any specific transaction. Every transaction is assessed on its own facts.