ITIN Mortgage Loans
The Social Security Numbers are identification codes (6) issued to eligible foreigners (5) and US citizens (4). Unqualified aliens with ineligibility to become beneficiary of an SSN (10), may submit with the Internal Revenue Service the form W-7 (8) to be provided with an Individual Taxpayer Identification Number or ITIN (9)
An ITIN mortgage loan is a type of non-qualified mortgage where the potential borrower identifies himself with an ITIN tax processing registration as proof of his identity without the exhibition of a Social Security Number.
The individual who bears an ITIN as his tax processing identification number can qualify to become the borrower of a mortgage loan (7).
A person without an SSN can be the beneficiary of a mortgage loan and become a homeowner afterwards. As proof of his identity and his ties with the country, he must have at least an individual taxpayer identification number, known as ITIN. ITIN was created by the Internal Revenue Service
These ITIN Mortgage loans are regarded as non-conventional loans. Thus, the potential borrower has to address subprime lenders, private, and non-conventional lenders in order to obtain a mortgage loan.
So we can define here, that the ITIN mortgage loans are envisaged for taxpayers that are potential borrowers and because of their resident status do not possess a Social Security Number. Despite their ineligibility for the aforementioned document, this subject may submit their ITIN to qualify for a loan in general, or for a mortgage loan in particular.
The IRS is interested in enforcing the Internal Revenue Code.
There are rules of confidentiality that protect the ITIN registered persons against immigration enforcement.
The Internal Revenue Code in its number 6103 absolutely forbids the disclosure of taxpayer information, as a general principle.
The ITIN numbers that are issued by the Internal Revenue Service for any taxpayer who is not eligible to obtain a Social Security number.
And who are these individuals that are not eligible for a Social Security number but may obtain an individual taxpayer identification number?
First, we have the most common case that are immigrants that are not authorized by law to remain in the United States.
Another case, becoming more common, are the individuals that are lawfully present in our country. For example, Europeans can stay up to six months with their electronic visa, and during that time they decide for example to pay taxes in the United States for whatever reason. They are here for a business and then in order to engage in these activities, they require this individual taxpayer identification number.
Therefore, this status of a potential borrower who is in the US and requires to pay taxes, and cannot be eligible for a Social Security Number is very well known by the lenders. There are many lenders who are looking for potential borrowers in this aforementioned status and do business with them period so if you are in this situation just know that there are lenders of non-conventional loans interested in your profile.
Which disregard of the residence status of the taxpayer, the Internal Revenue Service requires every subject who is earning income in our country to report it. Likewise, they do not share that information with the Department of Homeland Security.
Pros And Cons Of The ITIN Mortgage Loans
- A mortgage payment can be deducted from the income tax.
- You can utilize gift funds to assist with the initial down payment.
- The rates can be better than the stated income loans and the “hard money” loans. However, bear in mind that as this is a non-conventional mortgage loan. You will have higher interest rates than the ones you have in a USDA, VA, or FHA loan. Talk about this with the lender because if you are going to do some down payment if you have a decent credit score and the loan amount is not so large, the lenders will be able to sit to negotiate this with you.
- It is not necessary for the prospective borrower to prove that he is a legal resident in the United States. He just only requires this individual tax identification number (ITIN) which is provided to all foreigners that are not eligible for the Social Security Number. Therefore these potential borrowers can own a home in the United States too.
- Not many lenders available. There are many lenders who do not offer ITIN mortgage loans and just concentrate on conventional loans. However, if you feel a very simple form with us we put you in contact with lenders who are exactly looking for prospective borrowers who have a profile similar to yours.
- The rates are higher than with conventional products like FHA loans or VA loans. This is quite normal and applies to other subprime products like stated income loans, or no-doc loans. There is a lot of competition in the non-conventional mortgage loans market, so do not expect very high rates anyway.
- Likewise, down payment requirements are higher. Please note, that the lender here will look at, generally speaking, your ability to pay and he will pay attention to your credit score the amount of the loan, and the possible down payment that you can tender.
Requirements for an ITIN Mortgage loan
The requirements that we will study now below are the usual requirements that we see in the housing market for loans of this kind. However, I will suggest that you complete a form with us where you will be contacted by many lenders and you can negotiate with them the conditions.
The advantage that we have many different lenders to contact you is very important. There is a competition between them. This competition will help you to negotiate easier with them the conditions of the future covenant that would favor you the most. Now let’s see the average requirements that we are seeing in the housing market right below
- The credit score of the borrower must be higher than for a conventional loan. Therefore, this means that if you require one of these loans it will be higher than what you can expect to pay for an FHA loan or a USDA loan. This is quite normal.
- It is required a down payment of, generally speaking, at least 12% and this depends on your credit score and the loan amount that you are requesting. Here this depends on what you can arrange with your lender but what I see, is the market asking for up to 20% of down payment.
- Debt-to-income ratio is usually at an average of 45%
- In the case of freelancers, they can provide a 1099 form. This is the form used for miscellaneous income and it is submitted to the Internal Revenue Service. With this ITIN number the taxpayer should have filed at least one year and a half of tax declarations.
- if you are a freelance contractor, or you are a person who is self-employed, you can present bank statements of a range of about a one-year timeframe. Instead, if you require a mortgage for a property object that you will not occupy, you can also have access in this case to a stated income loan. This, like many other requirements, should be discussed with your potential lender where you will see which conditions are the most advantageous for you.
- Similar to what we explained before, you have to furnish the lender pay stubs for about three months.
Other Factors That Can Help You As A Borrower
These ITIN mortgage loans are not conventional loans. You do not have a Social Security Number and most probably you do not have a yet constructed a reasonably good credit score. So you have to find other ways to build confidence in the lenders and show them that you have the ability to pay.
Therefore, I would suggest you pay attention to the following situations that you can improve to show the lenders this ability-to-pay that you have.
- Evidence of payments done to service providers: I am sure that you have payments done to the Internet company, cell phone company, maybe insurance for a car, and for sure utilities that you have paid. Furnish these pieces of evidence to the prospective lender so you can exhibit him that you are doing payments on time always. A statement from the utility company that your account does not have any outstanding payments is also a good idea.
- Work experience: if you don’t have a Social Security Number, probably you did not have any employment registered. However, you probably have payments received acting as a contractor. Likewise, if you are a freelancer you can have this, or payments done to you by customers if you are a self-employed person. The more you can have of these pieces of evidence of the stability and ability to pay, the better. This will help you to demonstrate that you have a steady source of income.
- Bank statements: Prepare to have bank statements from a timeframe of at least six months at hand. Keep these statements and be ready to collect at least six months. But if you have more than six months much better. In fact, the majority of the ITIN mortgage lenders would request you more than six months. As you can imagine, the more you have the better.
- Cash reserves: The bank statements described above should show that you have good cash reserves. Therefore, I would suggest you keep that bank account with money. In each monthly bank statement, it will appear that you always have money as cash reserve.
- Credit cards: It is possible, that at this moment you do not have any credit score, and therefore, you do not have credit cards at all. However, you should obtain a secured credit card. This secured credit card will have an APR that is much higher than normal rewards credit cards or conventional credit cards. That does not matter to you in your global strategy. With this secured credit card, you will be able to build a credit score with time. So in this case, make some purchases per month, show that you are using the card, and then at the end of the month even if you have the option to pay just a part of the balance, pay the whole balance completely. Close the month for that secured credit card. This will help you to improve rapidly your credit score and would make a lender or an underwriter quite comfortable about your ability to pay.
Types of Property Objects That Usually Qualify For An ITIN Mortgage Loan.
- Residential buildings with not more than four units. More than 4 units will increment considerably the risk for this lender, so what we see is that lenders would limit to residential buildings up to four units.
- Condos and single-family homes: These are the most common property types that we see. In this case is, the most common situation is that the borrower will purchase this property object as his principal residence. As we explained before it is possible also to acquire a property through the system just for investment.
ITIN mortgage loans are a very good options for all foreigners without a SSN, provided that they have a decent credit score, several months of bank statements and the ability to perform a downpayment of at least about twelve percent.
The interest rate, despite being a non-conventional mortgage, is not as high as with hard money loans or stated income mortgage loans, however, it is not as low as a VA loan or a USDA loan.
We have in the market right now very decent interest rates because of the severe competition between these sub-prime lenders.
I will suggest you that you have handy your ITIN registration and a credit score of not less than 550, that you can build gradually using secured credit cards. You should have a cash reserve in your account for several months, prepare a down payment, and be able to show more than one year of history as a self-employed or freelance contractor.
I suggest you complete a form here below with some basic information. Then you will have ITIN lenders contacting you. You can decide later on which is more suitable for you according to the requirements discussed with them.
We have interesting articles about non-conventional mortgage loans. The basic ones we will recommend to you are stated income loans, where we discuss if they are currently legal or not, how can you obtain one, and the situation of these loans in California. We are also covering other non-conventional mortgages, such as the ITIN mortgages, luxury home financing that is a figure similar to the jumbo loans, the no ratio loans that do not consider the debt-to-income ratio during the underwriting process, and those loans offered by Funding For Flipping.
If you are into more conventional mortgages such as FHA mortgages, I suggest you read the following related articles described below.
We explain the FHA loan requirements completely, with the current limits for this year. We also go through the appraisal guidelines, and moreover, we are worried about the peeling paint and why it can be an issue.
Completing forms is necessary, so we also study the number format of an FHA case and how to submit an FHA file, how to complete the form HUD 92900, the form for the FHA notice to the homeowner, and the FHA Financing Addendum.
Regarding special housing programs, I would like to include the FHA Back To Work Program.