Wednesday, August 4, 2021
mortage

How to get a mortgage in the US without being a citizen

You don’t need to live in the states to get the American dream. You can own a home in the US without being a citizen. Whether it’s an investment, a rental, or your own home, here’s how you can access financing to purchase a house in the US as a non-resident.

Applying for an Individual Taxpayer Identification Number (ITIN)

The first step is to acquire an Individual Taxpayer Identification Number (ITIN), which you can use to open bank accounts, access mortgages, or pay income tax. An ITIN is like a social security number for non-citizens. It is a tax processing number issued by the Internal Revenue Service (IRS). The IRS issues ITINs to help individuals comply with US tax laws and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security numbers. They are issued regardless of immigration status.

To apply for the ITIN, you can download the W-7 form at itin-services.com. This is the same form that foreigners should fill out when applying to invest in foreign stocks. You may have heard me mention it in my episode on investing in foreign stocks.

The W-7 form asks for information such as your Name, Address, Country of Citizenship, Date of birth, Place of birth, and Signature. After this form is completed, it should be sent directly to the IRS centre for ITIN in Texas.

ITIN Loans and Mortgages

Next, save for a down payment and get your documentation ready because within six weeks, you should receive your nine-digit ITIN.

Once you have your ITIN, you can apply for ITIN loans. These loans can be accessed by non-citizens and are available from companies and banks across the US. These include Rocket Mortgage by Quicken Loans, New American Funding, Alterra Home Loans, Suntrust, and Bank of America.

The exact loan requirements will depend on the lender. Expect to be required to provide the following with any ITIN mortgage lender:

Credit — Many lenders will consider using alternative forms of credit documentation, such as utility and phone bills.

Employment — You will need to provide proof of two years of consistent employment.

Tax Returns – Your lender will want to see the last two years of tax returns (W-2 or 1099). For non-US citizens/residents, ask your lender how you should proceed with this.

Down Payment — Expect to need to put at least 15 per cent down. The minimum down payment will depend on the lender, but ITIN loans usually require a larger down payment than the usual 10 per cent.

Identification — A copy of your ITIN card, as well as a driver’s licence or passport will likely be required by any lender.

Bank Statements – You’ll need to provide two-six bank statements.

Pros and Cons

Advantages of an ITIN mortgage are that they are available to non-citizens, they do not require a social security number, and they provide flexible credit requirements that allow you to use non-traditional sources of credit.

Disadvantages, however, include higher rates than conventional loans and larger than average down payments. The down payment may be higher than average since there are more risks involved for the bank offering the loan to you. The down payment may range from 15-20 per cent.

As any standard mortgage, the loan is against the value of your home, which means the lender has the right to repossess if you fail to make payments. In most ways, an ITIN loan is similar to other conventional mortgage loans. If you qualify, and are able to place the required down payment, and can comfortably afford the mortgage payment, an ITIN loan may allow you to build a real estate portfolio in the US without citizenship.

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