3 Loan Secrets Ex-Pats Must Know Before They Go
As the world becomes increasingly connected, more Americans are working overseas. While modern technology offers a nearly seamless transition, not all aspects of your financial life reach overseas. Credit scores, banking documentation, and evidence of employment can cause trouble when you return.
When you move back you may not have a credit score and your credit cards may be cancelled. Without a score you won’t be able to get credit cards or buy a car or a home. Also, you will likely pay more for home, health, and car insurance or may not get a job you want. Don’t worry. There is an easy fix.
Keep Score: Credit bureaus don’t track overseas accounts. When you have no credit activity for a few years, the credit bureaus will not give you a score. Without a credit score, your options for loans are very limited. While you can re-establish credit faster than you can fix bad credit, it is much more difficult.
An additional problem is that banks cancel credit cards if they are not used for a year or more. Also, your score will go down as you open more accounts. A lower credit score can limit your options and cost you thousands in interest. So not only is it a hassle, losing your credit cards can cost you a lot of money.
The solution is simple. Keep two US credit cards that you can pay online. Have two in case one is cancelled for some other reason. Then use them a few times each year. Either charge a holiday gift or just buy some songs for your iPod. You may already plan to keep a card, but now you know you need two.
Move Your Assets: A client who moved back from Brazil kept a current credit profile, but still had problems with assets. His rollover IRA was here, but all of his other assets were in Brazil. He had to move the assets and then wait 60 days for them to be “seasoned”. Most home loans required “seasoned” funds for down payment. The problem is he found a house right away. Bank statements in anything other than dollars and English cause a lot of headaches.
This time there are several options. You can just plan ahead and move the money in advance, leave money in the US, or use an international bank where you can get statements in English and move money much easier.
Mind the Gap: Expats face another problem with mortgage rules for proof of employment and income. You must document a two-year history of employment and income. Doing so after the fact can be very time consuming and costly or it may not even be possible. Without it, lenders will often apply a new rule for those with gaps in employment. This rule requires you be on the job for 6 months to qualify for a loan. Be aware that you have to wait a year to use bonus or commission income to qualify. If you are self employed, you will have to wait two years.
Again, the fix is easy. Simply document your foreign employment and income as you work. If you scan or fax all of your documents to an online backup service, they will be secure and available from any computer in the world. Pay the nominal monthly subscription service with one of your credit cards and solve two problems at once.
Finally, find a lender who specializes in working with Expats. They can update you on changing loan rules while you are away. When you return, they will save you a lot of time and money getting your loan closed as planned.