When looking to buy a home, many borrowers face numerous challenges when it comes to the application process. Will their credit meet the requirements? Do they have enough income and assets? However, for many foreign nationals without a social security number, the idea of applying for a traditional home mortgage may seem out of reach. The good news is the ITIN number mortgage loan allows many individuals to apply for a foreign national mortgage and achieve the American dream of owning a home. What is an ITIN number, and how do these loans work?
Key takeaways
- The ITIN mortgage loan program enables foreign nationals without a social security number to finance a home in the US.
- An ITIN is issued by the IRS to individuals who don’t qualify for a social security number.
- To be eligible for an ITIN mortgage loan, borrowers must provide two years of tax returns, make a minimum down payment of 10-20%, and have a debt-to-income ratio of no more than 43%.
- The ITIN loan program has advantages like building credit, no need for a green card, and allows refinancing. However, the loan process can be lengthier, require a higher down payment, and have higher interest rates than traditional loans.
What is an Individual Taxpayer Identification (ITIN) Number?
A Tax Identification Number (TIN) is an umbrella term used to describe various forms of identification used and provided by the Internal Revenue Service (IRS). For most American citizens, the number issued by the IRS is a social security number (SSN). However, not everyone living in the United States is eligible to receive an SSN.
For resident aliens, non-resident aliens, and their dependents or spouses that are not eligible for an SSN, the IRS issues an Individual Taxpayer Identification Number (ITIN) that allows them to file U.S. tax returns and apply for credit. This number may be used as an alternate to a social security number when applying for certain credit, including an ITIN mortgage.
What is ITIN mortgage loan program?
The ITIN mortgage loan program was developed to allow those without a social security number to buy and finance a home in the United States. For example, many Europeans come into the US for business and leisure, only staying for six months as allowed by their visa. In these cases, they often pay taxes to the government and may already have an ITIN number. Instead of renting every time they come to the US, they can purchase a home. This is where the ITIN mortgage loan program offers a solution. When applying for this home loan program, the person uses their ITIN number in place of a social security number in order to verify identity and check credit history.
How do ITIN loan programs work?
When individuals without a social security number want to apply for a home mortgage, they can use their ITIN number. If they do not have this number already, they can apply to the IRS to issue the number. When applying for a mortgage, they will need to find a lender that offers an ITIN loan program and, when applying, use the ITIN number in place of the social security number. When applying for these loans, the borrower will also need to meet the additional loan requirements. Once completed, the application is processed, similar to a traditional mortgage loan. The buyer then receives the keys to their new home.
Eligibility for an ITIN
As with any mortgage loan, an ITIN loan has minimum requirements to qualify. These requirements can include:
- A Non-Resident in the United States
- Two documents proving identities, such as passports, driver’s license, or national ID card
- Minimum down payment between 10-20%
- Two years of tax returns
- Minimum of two months of bank statements and income verification, such as pay stubs
- Debt-to-income ratio no more than 43%
For those with an ITIN number, building a traditional credit score can be difficult. If you do not have an established credit score, lenders use “non-traditional” credit. Instead, they will require examples of regular, timely payments with items such as rent, utility payments, and insurance.
Advantages and disadvantages of tax-ID loans
As with any traditional loan, there are advantages and disadvantages associated with the ITIN loan program.
Advantages
- No social security card necessary: Using the ITIN number allows you to purchase a home and still abide by the U.S. tax laws.
- No green card needed: You do not need to prove legal residency to qualify.
- Use it to refinance mortgages: You can opt to refinance later down the road when interest rates are more beneficial.
- Build credit with an ITIN: An ITIN number allows you to build credit.
- Better than hard money loans: Hard money loans are often high-interest rate loans that focus on the property’s value as collateral. An ITIN loan offers interest rates closer to conventional mortgages.
- Online: In most cases, the entire process can be completed online.
- Allows you to live the American dream: Qualifying for an ITIN loan will enable you to purchase your first home and achieve the American Dream of homeownership.
Disadvantages
- Time constraints: Applying for and receiving your ITIN number can take more than six weeks, so applying well before you plan to seek a mortgage is essential.
- Higher interest rates: This is considered a non-traditional loan, so interest rates are slightly higher.
- Higher denial rates: There is a high rate of ITIN denials due to improper identification. When applying for your ITIN number, you must ensure you provide the proper identifying documentation.
- Not offered by all banks: ITIN loans are not offered by all banks and financial institutions.
- Requires higher down payment: In most cases, an ITIN loan will require a higher down payment than is seen with traditional home loans.
Let us help you achieve homeownership.
The ITIN loan program is designed to help foreign nationals achieve the American dream of homeownership. However, at Hero Home Programs, we understand that the process can be intimidating and difficult to understand. Our goal is to help everyone achieve homeownership, and our team is available to help. Let Hero Home Programs walk you through the home buying process and help you receive the keys to your new home. Request a consultation with us today.
