As of this writing, the Seoul Real Estate Investing Meetup is the largest real estate focused meetup in Korea on meetup.com. This article, by Dan Ryu, one of the co-organizers, details how he and his investing partner were able to successfully apply for a bank loan in the US while living and working in Korea. This content is purely for educational purposes and meant to show their experiences. It should not be taken as financial or banking advice and for any matter related to your own personal situation, please consult with a professional advisor. To network with other investors, join the Seoul Real Estate Investing Meetup's Facebook Group. To join the meetup and be kept up to date on future events, visit our Meetup Group page on meetup.com.
One of the biggest challenges of investing from overseas as an expat is applying for a bank loan. It's not an easy task and there's no guarantee you'll find a bank that will work with you.
That being said, my real estate investing partner, Ben Hauser and I went through the process - applying for a US bank loan while we were living and working in Korea (more precisely, Ben applied and I helped him create the Loan Presentation).
Here's a step by step guide on how we put together the loan documents. The good news - Ben was able to qualify! The bad news - it took about 2 months and several phone calls.
The loan was processed in the middle of 2014, and I the believe the pre-approval rate quoted at that time was up to 4.875% with 25% down.
One loan officer I spoke with (a friend) told me,
If you want to do business with a bank, always make sure you have your paperwork ready.
With those words of wisdom in mind, we set about to create a presentation that would help the loan officer (and more importantly, the underwriter) get to know Ben better as well as help both understand some of the complications involved with Form 2555-EZ - Foreign Income Exclusion and explain how Fannie Mae views foreign earned income. (The loan officer admitted this was the first time she had dealt with someone living overseas, so it was all new to her. She praised us on the organization of our 'loan binder' and found it very helpful for both her and the underwriter. She said this presentation almost qualified us to work at a bank!)
Here's an overview of the contents we put together for a Loan Presentation:
Page 1: Title Page and Confidentiality Statement
We also included a photo of Ben.
Page 2: Personal information
- Full Name
- Social Security Number
- Driver's License
- Picture of Driver's License (Scan)
Page 3: Information about IRS Form 2555
Page 4: Extra Note on 2555
(Since US Citizens living in Korea and earning income qualify for the Foreign Earned Income Exclusion, Line 37 of your 1040 will reflect your salary after this exemption has been applied. For those who earned less than $97,600 - should be a dollar sign, not a won sign; that means you earned $0 - great for not having to pay taxes! But not so great if you're trying to qualify for a loan and the underwriter says, "But... you didn't earn any money?" NOTE: Keep in mind this is not tax advice! Consult your tax advisor for any questions regarding this.)
Page 5: Fannie Mae guidelines re: foreign income
(Letting the underwriter know that Fannie Mae accepts foreign income and this will conform to Fannie Mae standards.)
(noticed we referenced where in the Selling Guide this information could be found)
Next several pages:
- Signed Copy of 2013 Income Tax Statement * Including Form 2555
- Signed Copy of 2012 Income Tax Statement* Including Form 2555
- Signed Copy of 2011 Income Tax Statement * Including Form 2555
Next several pages:
- Current employer business license (Korean) and translated in English using Rev.com
- Current employer business cards / stationary with address visible and name
- Screenshot of current employer website with logo / url visible
- Employment verification letter (This you will get from your bank. It's basically a statement that the bank asks your employer to fill out. It asks questions about how much income you earned.) Fill out the form - Usually you will need to supply income amounts as well as any 'explanation' if your income fluctuates (ie. you receive bonuses)
Translated yearly earnings
Received this from the Korean tax office. This document that shows your monthly income - Translated it through rev.com (for years 2013 and 2012)
Company generated payment stubs for the last 6 months (since this tax return hadn't been filed yet) to show current salary.
- Bank Statements from both US and Korean Bank Accounts
- Personal Asset Statements (stocks, bonds, IRAs, other)
- Balance Sheet of Assets vs Liabilities that showed an overall networth
- note: Bank already had copy of credit reports
Putting it all together
In order to pull this all off, you need to have some kind of editing program. The loan presentation was put together using iBooks Author for Mac.
Other programs will work (Word / Pages / etc). To make the process easier, it would be ideal if the program allowed you to edit and include documents snapshots of documents as well as .pdf files.
Most of the "paper documents" such as Tax Returns - I snapped pictures of and then converted to .pdf files.
If you want to go a little further, you can also include info about the 'type' of deal you're looking to buy. Think of it as an executive summary of a business plan.
- Photo images of proposed project
- Financials of proposed project (You can add in an IRR calculation here as well. For more on IRR, click here.)
Alright... I know it seems a bit overwhelming. It took about a month to pull together all the documents. It took another two months to get the loan approved. Much will depend on how good your record-keeping is and how long it takes you to get info from the your Employer. The tax documents should be easily attainable from the Korean tax office.
Part of the reason why it took so long is that we weren't sure what we needed. However, now that you have a starting point and some direction, your own binder should be a lot easier to put together!
What do you think? Was this info helpful? Leave a comment below!
And for more on banking, check out this post: