The Complete Guide to ITIN Mortgage Loans
If you’re a home buyer without a Social Security Number (SSN), shopping around for a mortgage can be a daunting and challenging process. You might be wondering: Is it even possible to secure a mortgage without an SSN? What options do I have?
While you may not have an SSN, perhaps you have an Individual Taxpayer Identification Number (ITIN) instead. For those holding an ITIN, there’s a specialized type of loan available called ITIN mortgage loans.
ITIN loans are picking up steam. According to some mortgage brokers, they’re one of the most popular loan products on the market today, along with non-QM loan options such as Bank Statements, DSCR loans, and more.
In this guide, we’ll be uncovering the essential information that every prospective homebuyer or investor needs to know when it comes to ITIN mortgage loans. From eligibility requirements to specific lenders and alternative options, this guide has you covered.
What is an ITIN?
An ITIN, short for Individual Taxpayer Identification Number, is a nine-digit tax processing number issued by the Internal Revenue Service (IRS) to those who need to file US tax returns but don’t have or aren’t eligible for a Social Security Number (SSN). This includes non-resident aliens, undocumented immigrants, and dependents who cannot get an SSN.
While an ITIN doesn’t grant work authorization or immigration status in the US, it does allow ITIN holders to:
- File Taxes: The main purpose of an ITIN is to allow individuals without an SSN to file US tax returns and comply with US tax laws.
- Open a Bank Account: Some financial institutions accept ITINs for the purpose of opening a bank account, which allows individuals to manage their finances and build a banking history.
- Apply for Credit: While not all lenders accept ITINs, some credit card companies and lenders may allow individuals to apply for credit using an ITIN, helping them build a credit history.
- Secure a Mortgage: Individuals with an ITIN may be eligible for ITIN mortgages, enabling them to purchase a home with lenders who offer ITIN loans
- Enter into Rental Agreements: Landlords may accept an ITIN as a form of identification when entering into rental agreements.
- Access Some Government Services: In some cases, an ITIN may be accepted as a form of identification to access certain government services.
Despite ITINs having many uses that are similar to an SSN, it’s important to keep in mind that an ITIN is not a substitute for an SSN in all situations.
How Can You Get an ITIN?
If you don’t have an ITIN yet but are thinking of getting one due to being ineligible for an SSN, there are three main ways you can do this:
- Applying With Your Federal Tax Return: This is the most common method. You’ll need to complete Form W-7, Application for IRS Individual Taxpayer Identification Number, and submit it along with your federal tax return and original or certified copies of acceptable identification documents.
- Applying Through an IRS Taxpayer Assistance Center: You can schedule an appointment at an IRS Taxpayer Assistance Center and bring your completed Form W-7 and required identification documents. An IRS representative will assist you with the application process and verify your documents.
- Using an IRS-Authorized Certifying Acceptance Agent: These authorized agents can review your application and supporting documents at a designated location instead of needing to send them to the IRS yourself. This can expedite the process, but there may be fees associated with this service.
For additional resources and assistance on applying for an ITIN, don’t hesitate to explore the IRS website or reach out to them directly to find out more about the ITIN application process.
Can You Buy Property with an ITIN?
The short answer is: Yes, you can buy property with an ITIN. When purchasing property with an ITIN, homebuyers typically follow a process similar to that of buyers with an SSN. They can apply for mortgages specifically designed for ITIN holders, which typically have different eligibility criteria and terms compared to traditional loans.
ITIN mortgage loans cater to homebuyers who don’t have an SSN, often including non-residents, foreign national investors, international self-employed individuals, or those with unique income structures. Keep in mind that ITIN mortgage loans are considered to be specialized lending products and you would need to find lenders that offer this type of financing.
These lenders who do offer ITIN mortgages understand the unique circumstances of ITIN holders and tailor their loan products to accommodate their needs. The application process usually involves providing necessary documentation, such as proof of identity, foreign status, and income verification.
While ITIN mortgages present an opportunity to be a homeowner without an SSN, ITIN holders should be prepared for potential stricter requirements in comparison to standard mortgages. This could include higher down payments and potentially tighter credit score requirements. Additional documentation could be required depending on the lender, so gathering extra documentation, such as tax returns, bank statements, and proof of income, can make the process smoother.
ITIN holders should also keep in mind that while getting an ITIN mortgage loan is a viable option, there are alternative financing options for international borrowers such as seller financing or partnerships and foreign national loans depending on their specific situation.
ITIN Mortgage Loans: What Are They?
ITIN mortgage loans, or Individual Taxpayer Identification Number mortgage loans, are specialized lending products that are designed to make homeownership a reality for individuals who don’t have or aren’t eligible for an SSN. An ITIN serves as a unique identification number issued by the IRS for tax purposes, allowing people without an SSN to comply with US tax regulations.
ITIN mortgage loans can be particularly useful for those who may not qualify for traditional mortgages due to their immigration status or other circumstances. These loans are tailored to the specific needs of ITIN holders, providing a way for them to purchase homes or investment properties. Something to note is that ITIN mortgage loans typically have different eligibility criteria compared to traditional loans because of the diverse financial profiles of ITIN holders.
While specific requirements vary among lenders, ITIN mortgage applicants generally need to demonstrate a stable income, provide proof of identity and foreign status, and follow specific down payment criteria.
Since ITIN mortgages are typically considered to be non-Qualified Mortgages (non-QM), you’ll have to find specialized lenders who have experience serving this niche market. These lenders understand the unique circumstances of ITIN holders and structure their loan products accordingly. You can explore various types of ITIN mortgage loans, including fixed-rate and adjustable-rate mortgages, depending on your preferences and financial situation.
It’s important to note that not all lenders who specialize in non-QM loans offer ITIN mortgages.
However, there are alternative loan options for foreign nationals and those without a SSN, aside from ITIN mortgages, should these options be a better fit and should you not have an ITIN. (We know both these options well – more on this below.)
ITIN Loan Requirements
The specific requirements for an ITIN loan can vary greatly between lenders, but here are common requirements that need to be provided during the application process:
- ITIN Number: You need a valid and current ITIN issued by the IRS.
- Proof of Identity: Lenders typically require official identification documents, such as a passport, to verify your identity.
- Residency Status: Since ITINs are often used by individuals who are not US citizens or permanent residents, you may need to provide documentation confirming your residency status.
- Stable Income: Lenders will assess your ability to repay the loan, so you’ll likely need to provide proof of income. This can include pay stubs, bank statements, or other relevant financial documentation.
- Down Payment: ITIN loans usually require a down payment, and while the amount may vary depending on the lender, you can expect to put down anywhere between 10-25%.
- Credit History: While ITIN loans may be accessible to individuals with limited or no credit history, some lenders still check your credit report.
- Employment Verification: Employment verification or confirmation of self-employment status may be requested by the lender to ensure a stable source of income.
Since requirements may vary depending on the lender, reaching out to specific lenders who offer ITIN loans can give you a better idea of what you need based on your individual circumstances.
5 Top Mortgage Lenders for ITIN Loans
- Fairway Independent Mortgage
Fairway Independent Mortgage, established in 1996, stands out as a national mortgage lender headquartered in Madison, Wisconsin. They prioritize award-winning customer service, fostering a “Fairway Nation” experience with dedicated loan officers and the industry’s fastest turn times. The company was recently ranked #1 in customer satisfaction by J.D. Power in 2023. Known for their flexible and diverse loan options, they cater to varied needs with conventional, FHA, VA, USDA, and niche programs for first-time buyers and unique financing situations. Their commitment to the community goes beyond mortgages, actively supporting community service endeavors and financial literacy programs. Fairway Independent Mortgage aims to unlock the door to homeownership for all.
- Guaranteed Rate
Founded in 2000, Guaranteed Rate is a US residential mortgage lender headquartered in Chicago. It operates through over 600 branches nationwide and offers a range of mortgage products for purchase, refinance, and renovation. Known for its technology-driven approach, Guaranteed Rate pioneered the digital mortgage, allowing for streamlined online applications and faster closing times. With a focus on innovation and a commitment to making the mortgage process more accessible, Guaranteed Rate aims to empower borrowers and help them achieve their homeownership goals.
- New American Funding
New American Funding was founded in 2002 and is now a leading national mortgage lender headquartered in Orange County, California. They specialize in a diverse range of loan options, including conventional, FHA, VA, and niche products like those designed for underserved communities and cash buyers. Recognized for their commitment to customer service and innovation, New American Funding invests heavily in technology to streamline the mortgage process and offer faster pre-approvals and closings. They are also actively involved in supporting local communities through charitable initiatives and partnerships. New American Funding strives to be a trusted and accessible partner in achieving the dream of homeownership.
- Defy Mortgage
Defy Mortgage is a non-bank lender with a simple, clear mission: to empower dreams, enrich lives, and elevate the mortgage experience for non-traditional borrowers, such as those without SSB, self-employed individuals, real estate investors and more. Defy specializes in non-QM loans and is comprised of a team with over 100+ years of combined industry experience helping non-traditional borrowers obtain home financing. With decades of expertise facilitating global financial transactions and an unparalleled grasp of policies governing international lending practices, Defy recognizes that the borrowers of tomorrow require more flexible options than traditional institutions typically consider. Driven by a passion to challenge the status quo and create a new era of lending that puts the power in the hands of borrowers, their strong understanding of the current market and the CEO, Todd Orlando’s, 25+ years of experience in the mortgage and banking space puts them on the map.
- Guild Mortgage
Founded in 1960, Guild Mortgage is a seasoned national mortgage lender that’s renowned for their customer-centric approach. They offer a vast portfolio of loan options to fit diverse needs, including conventional, FHA, VA, USDA, and specialized programs for first-time buyers and renovation loans. Guild Mortgage leverages advanced technology to expedite the mortgage process, providing a user-friendly online platform and mobile app for streamlined communication and document management. In addition to offering mortgage products, they actively support affordable housing initiatives and financial literacy programs. Guild Mortgage aims to empower borrowers and navigate them smoothly towards achieving their homeownership dreams.
ITIN Loans vs. Foreign National Loans
For individuals who don’t have an SSN or aren’t US citizens, both ITIN loans and foreign national loans provide the opportunity to become a homeowner. These loans are specialized lending products that are tailored for people with unique circumstances. While both offer a non-traditional path to homeownership, there are some key differences between the two.
An ITIN loan is specifically designed for those with a valid ITIN. Similar to an SSN, an ITIN allows holders to file taxes, open a bank account, and build a credit history. This ITIN number is used by the IRS to identify individuals, as well as banks and lenders to evaluate someone’s financial history. It’s possible to establish a credit history with an ITIN, which can make it easier for lenders to assess an ITIN holder’s ability to handle debt. For most lenders who offer ITIN loans, a US credit report is required.
On the other hand, foreign national loans are geared towards non-US citizens and non-US residents who may not have an SSN or ITIN. These loans make it easier for foreign nationals to buy property in the US without a US credit score (FICO), green card, visa, ITIN, or social security number, and take into account credit and financial history from the foreign national’s home country rather than their US credit history.
The main benefit of a foreign national loan is having access to the US housing market despite not being a US citizen or resident. This provides borrowers with an opportunity to expand their property portfolios and holdings globally. Some lenders, like us at Defy, offer foreign national loans and DSCR loans for investment properties.
Despite both types of loans serving the immigrant and non-resident populations, the eligibility criteria, down payment requirements, and interest rates may vary between the two. If you’re trying to decide which one is more suitable for your unique circumstances, reach out to lenders directly so you can carefully review the terms offered by lenders specializing in each type of loan.
Benefits of ITIN Loans
ITIN loans have numerous benefits, including:
- Accessibility: ITIN mortgages provide a financing option for individuals without an SSN, including non-U.S. citizens and immigrants.
- Unlocks Homeownership Opportunities: ITIN loans open doors to homeownership for those who might otherwise face challenges in qualifying for traditional mortgages. This allows a more diverse population of people to have access to the housing market.
- Potentially Lower Down Payments Compared to Foreign National Loans: While still generally requiring higher down payments than traditional mortgages, ITIN loans may offer lower down payment options compared to those specifically designed for foreign nationals.
- Tax Compliance: Having an ITIN allows borrowers to fulfill US tax requirements, which is a key factor for mortgage approval.
- Flexible Documentation: ITIN mortgage lenders often have more flexible documentation requirements, accommodating those with non-traditional income sources.
- Building Credit: Successfully managing an ITIN mortgage can contribute to building a positive credit history, opening up the door to future borrowing opportunities.
Disadvantages of ITIN Loans
While ITIN loans have multiple great benefits, here are some disadvantages to consider:
- Higher Rates & Requirements: ITIN mortgages may come with higher interest rates compared to traditional loans, reflecting the perceived risk associated with borrowers without an SSN and borrowers may face higher down payment requirements.
- Stricter Eligibility Criteria: Borrowers may face stricter eligibility criteria, including more comprehensive income verification.
- Limited Lender Options: The number of lenders offering ITIN mortgages may be limited, reducing the variety of loan products and terms available to borrowers.
- Limited Loan Options: In addition to the limited number of lenders, there might also be fewer options for loan products and ITIN holders may not qualify for certain government-backed programs.
- Varied State Regulations: State regulations can impact the availability and terms of ITIN mortgages, and these regulations may vary from one state to another.
ITIN Mortgage Loan Interest Rates
ITIN mortgage loan interest rates can vary depending on several factors, including the borrower’s credit history, the lender’s policies, and even factors out of anyone’s control like the current economic environment. Since so many factors affect the interest rate of ITIN mortgages, it’s difficult to provide an accurate estimate. However, you can generally expect ITIN mortgage rates to be slightly higher than those for traditional loans to compensate for the additional perceived risk associated with borrowers who don’t have an SSN.
Interest rates are always a crucial part of the overall homebuying process considering the large impact it makes on the total cost of borrowing and affordability. If your financial profile isn’t strong enough yet to secure favorable rates, perhaps consider strengthening your credit history prior to applying for a preapproval. If it’s just your US FICO that is of concern, consolider foreign national loan options which take into account your credit and financial history from your home country rather than your US credit history as noted above.
Those who are exploring ITIN mortgage loan options should carefully compare rates among lenders and understand their terms and conditions. By having several quotes from different lenders, you can make an informed decision that’s right for you.
History of ITIN Loans in the United States
The history of ITIN loans in the US begins with when the ITIN itself was created. Back in 1996, the IRS introduced the ITIN to give those who didn’t qualify for an SSN to meet their US tax obligations. Certain individuals such as foreign nationals, immigrants, and non-residents were eligible to get an ITIN, so they could report their income and pay taxes despite not having an SSN.
After its establishment, the number of people who had ITINs started to increase due to the growth of the immigrant population in the US. Sometimes immigrants who move to the country can’t immediately qualify for an SSN but still need access to financial services including bank accounts, loans, and other banking products to meet their financial needs and goals. This is when financial institutions began to take advantage of this opportunity to service an untapped market.
As the demand for ITIN financial services grew, some lenders began to expand their offerings to include specialized loan products that were specifically designed with ITIN holders in mind. In contrast to a traditional mortgage, these loans consider alternative credit data and other factors, such as income and employment history. ITIN loans have played a crucial role in inclusion within the personal finance space by allowing a more diverse population of people to build credit histories and provide them with access to home financing.
Today, ITIN mortgage loans are still available for ITIN holders who need a non-traditional path to homeownership. For those without an ITIN, there are still foreign national options. While some states have introduced regulations for ITIN loans to prevent predatory lending practices, they’re still fairly prevalent in the specialized lending market. ITIN mortgage loans are a valuable tool to create financial opportunities for foreign nationals, immigrants, and non-residents who don’t have access to the same traditional credit options as SSN holders.
Alternatives to ITIN Mortgages
Several alternatives exist for individuals who may not qualify for or prefer options other than ITIN mortgages. Keep in mind that not all lenders offer all of the alternatives listed below. These alternatives are more geared toward those without an SSN or with unique financial situations. Some options include:
- Foreign National Loans: Specifically designed for non-US citizens and non-US residents, foreign national loans allow borrowers to qualify without a US credit score, green card, visa, ITIN or SSN. Rather, overseas buyers can verify creditworthiness through alternative documentation like foreign credit reports.
- Seller Financing: In this arrangement, the seller acts as the lender, allowing the buyer to make payments directly to them. This can be a flexible option with negotiable terms.
- Partnership Financing: Co-investing with a partner or investor who has the necessary credentials can be a way to access financing without an SSN.
- Lease-to-Own: In a lease-to-own agreement, a portion of the monthly rent goes toward the future purchase of the property. This allows the tenant to build equity over time.
- Private Lenders: Some private lenders specialize in providing financing to individuals without traditional credentials. Interest rates and terms may vary.
- Co-Borrowing: Having a co-borrower with an SSN can enhance eligibility for traditional mortgages. This co-borrower shares responsibility for the loan.
FAQs
Can I Get an FHA Loan With an ITIN Number?
Generally, no you can’t get an FHA loan with an ITIN number – An SSN number is typically required. However, there’s an exception for passive principals where an SSN isn’t required. It’s recommended to refer to the official US Department of Housing and Urban Development (HUD) website for full FHA loan requirements.
Can You Build Credit with an ITIN?
Yes, you can build credit with an ITIN. Many financial institutions, including credit card companies and lenders, accept ITINs for credit applications.
Are ITIN Loans Available for Purchasing Both Primary Residences and Investment Properties?
ITIN loans are typically available for primary residences, but not always for investment properties. Check with lenders as availability and requirements vary.
Are Foreign National Loans Available for Purchasing Both Primary Residences and Investment Properties?
Yes! Foreign national loans are typically available for primary residences, secondary and investment properties. Check with lenders as availability and requirements vary.
How Big of a Down Payment Do I Need for an ITIN Mortgage Loan?
While down payments on ITIN mortgage loans can vary depending on the lender and their requirements, you can expect to put down anywhere between 10-25%.
Do ITIN Loans Have Higher Interest Rates Compared to Traditional Mortgage Loans?
Yes, ITIN loans generally have higher interest rates than traditional mortgages due to the increased risk for lenders. Expect rates to be 0.5-1.5% higher on average.
Can I Qualify for an ITIN Loan if I Don’t Have a Social Security Number?
Yes! ITIN mortgage loans were specifically designed for people who don’t have an SSN and rely on using an ITIN to file taxes instead. Another option for those who don’t have an SSN or ITIN are foreign national loans.
Are ITIN Loans Available Nationwide, or Are They Restricted to Specific States?
ITIN loans are generally available nationwide, though specific programs and availability might differ by state or lender. Always reach out to lenders in your area to confirm options and eligibility.
Can I Use an ITIN Loan to Purchase an Investment Property?
Some lenders may allow borrowers to use an ITIN loan to purchase an investment property. If you’re thinking of buying an investment property with only an ITIN, make sure you confirm with your lender that their policies allow it as this isn’t always the case.
Are There Any Prepayment Penalties for ITIN Mortgages?
Prepayment penalties for ITIN mortgages depend on the specific terms and conditions set by each lender. It’s important to always carefully review the terms and conditions of the loan offerings before committing to a lender.
Are ITIN Mortgages Considered Non-QM Loans?
Yes, ITIN (Individual Taxpayer Identification Number) loans are often considered Non-QM (Non-Qualified Mortgage) loans due to having non-traditional borrowers and typically less stringent requirements. Foreign national loans are also considered Non-QM (Non-Qualified Mortgage) loans.
Are Foreign National Loans Considered ITIN Loans?
Not all foreign national loans are ITIN loans. However, there are some foreign national loan programs that are specifically for borrowers with ITINs.
Does Defy Mortgage Offer ITIN Mortgages?
Yes! We also offer competitive foreign national loan options for primary, second, and investment properties – both purchase and refinance with cash-out.
