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Getting US loan after living abroad not easy

Sally Herigstad

Dear To Her Credit,
I am from the U.S., but have lived abroad for the past 15 years. I have 10 properties in my hometown in northern Michigan, all of which are rented and are debt free. I have had a great, secure job at an American company abroad for the past 10 years. I have no debt whatsoever. Because I have not lived in the states for a while, I have no credit score.

I would like to get a loan on one of my properties or a line of credit. My income and employment are fully verifiable. I hold all my properties in limited liability corporations (LLCs). I pay the taxes and insurance and other costs, but it doesn't seem to help me get a credit score. It's so frustrating.

My bank, where I have over $100,000 in cash and have had my checking account for years, turned me down for a loan. They said it was because I have no credit score, even though they said I am an excellent client. Any advice on how I can get a loan? -- Carole

Dear Carole,
With no negative credit marks, ample equity and money in the bank, it may seem like you should be able to get a mortgage easily. Unfortunately, when you are living outside the country for an extended period of time, getting a loan is a lot more complicated.

To get a loan, you may be able to build an alternative credit history with your record of on-time payments and other financial information. The trick is to find a lender that will allow it. Mortgage Broker Doug Brennecke of Rancho Financial Mortgage in San Diego, looked into some programs you may qualify for.

FHA loans won't be able to help you. According to Brennecke, FHA loan guidelines specifically state that cash-out refinances are for owner-occupied principal residences only.

Most lenders use automated underwriting to decide whether you get a loan. Although loans through Fannie Mae and Freddie Mac programs may allow for loans without credit scores, Brennecke believes most lenders will simply use the automated underwriting systems, which do not allow for alternative credit histories. He says he did not find support for a manual underwriting process that would allow an alternative credit history to be developed for use by Fannie Mae and Freddie Mac.

Brennecke says, "It would take a systematic contacting of lenders serving her area to see if anyone would consider a manual underwrite with alternative credit history for a conventional loan."

The most flexible program that Brennecke found would let you refinance one of the properties, but you would need to meet several requirements and limitations. "First, the minimum loan amount for this one lender would be $100,000 and the maximum loan-to-value ratio is 50 percent," says Brennecke. To meet both those requirements at once, the house would need to be worth at least $200,000. 

In addition, you'd need to fully document your earnings with U.S. tax returns. If you are working in a non-English speaking country, you will need certified translations of any financial documents required to back up your loan application.

You can contact lenders yourself, specifically asking each one if they allow alternative credit histories, or you can find a good mortgage broker in Michigan to help you.

Don't give up. Getting a loan is still possible with the right program and lender, and having one can help you start to build a credit score again. It's a good idea to consciously build a credit score throughout your life, even when you aren't sure you need one right away. As you've discovered, it's difficult to come up with a credit score at the last minute when you need it.

See related: Tips to rebuild credit after living abroad