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US Lender Finally Offering Mortgages in Costa Rica
International lenders have been in various stages of planning and executing initiatives to enter the Costa Rica for quite some time.
Many lenders had plans to launch their programs by last Christmas, however, experienced major setbacks and strategy shifts as a result of the "mortgage meltdown". Not all of these lenders, however, abandoned their plans and multiple new market entrants are finally offering residential mortgages to foreigners.
These US lenders currently do not offer financing for land acquisition or home construction. However, for those borrowers seeking to finance/refinance a finished home, these new programs offer several distinct advantages when compared to alternatives offered by Costa Rican banks.
The advantages of working with one of these US lenders for a mortgage in Costa Rica include:
- Stated Income Loans: There is finally a "Stated Income" mortgage product in Costa Rica. Just as with "Stated Income" programs in the US, tax returns or W-2's are not required. Borrower eligibility is primarily determined through job type, credit score and verifiable assets.
- 30 Year Amortization: Rates associated with these US lender programs are slightly higher than Costa Rican bank rates, however, loan terms are 30 years. Mortgages offered by local banks generally come with either 20 or 25 year terms. The increase in term from 20 to 30 years will result in a lower monthly payment, despite a marginal rate difference.
- "Two Comma" Loans: Though most Costa Rican banks will fund home loans in excess of $1MM+, their historical underwriting orientation involves a far more stringent approval process for "large" residential loans. For example, some of the leading local banks require overseas approval from their corporate parent, prior to granting a loan greater than $1MM. US lenders now active in the market have strategically targeted larger loans. Home loans up to $4MM are evaluated by these new US utilizing the same underwriting guidelines and approval process as $200K loans.
- Time to Close: The underwriting approval process utilized by US lenders is far more automated and streamlined than that of local banks, where foreign borrowers are. Once a complete file is submitted, closing should typically occur within 2-3 weeks.
- No Age Limit: In contrast with the majority of programs offered by local banks, these programs have no maximum age restrictions. Though exceptions exist, Costa Rica lenders typically do not offer financing to individuals greater than 64 years of age. As the "baby boomer" retiree market segment steadily expands, many senior retirees will be turning to banks outside of Costa Rica for their loans.
- No Life Insurance: As with the above mentioned age restrictions historically associated with Costa Rica financing, US lenders do not require borrowers to mitigate the fatality risk associated with second home lending to foreigners through life insurance. Though local lenders are moving towards eliminating this requirement, for the time being, this represents a significant cost savings (hassle as well) to borrowers who lack life insurance coverage.
Costa Rica Mortgage is proud to have been recognized by these US lenders as the leading source for residential financing in Costa Rica and entrusted as a first firm to offer their programs in Costa Rica. We are pleased to be able to offer these programs to our clients.
For those borrowers who neither qualify for these programs, nor find them relevant to their financing needs, we work closely with all of the leading Costa Rica lenders to routinely provide disproportionate value to our clients.
Written by Marc Schweitzer, President, Costa Rica Mortgage.
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