You can buy a house with an ITIN. You may even find several lenders willing to give you a loan even without a social security number. But, there are some things you need to know so that you can get the best possible loan for your situation.
You Need a Credit History
Here’s the thing – you need a credit history. That might seem hard to do if you don’t have a social security number, but there are ways.
The most common way anyone starts with a credit history, whether with or without a social security number is with a secured credit card. These credit lines are typically easy to obtain because you are required to put down a security deposit. The credit card company gives you a credit line that is equal to your security deposit. This way, if you default on your credit card, the credit card company can use the security deposit to pay the bill.
Before you accept a secured credit card, check with the credit card company on their procedures regarding reporting the credit card debt to the credit bureaus. If the credit card company doesn’t normally report secured credit cards to the credit bureaus, it won’t help you establish a credit score, which is the point in getting the credit card.
Consider an Alternative Credit History
If you can’t get a secured credit card or you can’t find a credit card company that reports to the credit bureaus, consider an alternative credit history. This is a history of your regular monthly bills that don’t report to the credit bureaus. Think of bills like:
If you pay any of these bills regularly, you may be able to build a history that way. You’ll need a 12 – 24-month history of these bills in order for lenders to use them, though. They use the alternative history as a way to gauge how well you handle your finances.
You Need a Large Down Payment
Lenders don’t like to give loans with high LTVs (loan-to-value ratios) to those without a social security number. What if you have a reason to leave the country quickly? If you don’t have a lot of your own money invested in the home, it could be easy to just walk away from the home, leaving the lender without their money.
Just how much you must put down will depend on the lender and your qualifying factors. It’s a good idea to have at least 20% saved for a down payment, but there’s nothing wrong with putting more than 20% down on the home. The more money you can put towards the home, the lower your risk of default becomes. This could make lenders more willing to give you a loan or even more willing to give you better rates and terms for the loan.
You Need Employment That Continues
You probably figured you have to prove an employment history. Lenders like to see at least a 2-year history at the same employer. This shows the lender consistency and reliability. While that’s great, lenders need to see that the employment will continue for the foreseeable future.
No one is able to predict whether you will have a job a few years from now, but the lender needs to know that the potential is there. You can prove that your job will continue by providing your contract with the employer. If the contract doesn’t expire within the next three years, most lenders will accept that as proof of continued employment.
You Need a Low Debt Ratio
Giving you a loan when you are a foreign national is a risk for a lender. Proving that you have the money to put down on the home and that you have a decent credit history is a start. But, lenders also like to see that you have a low debt ratio. They want to know that your income isn’t already spread thin. If you have a high debt ratio, it could leave you with difficulty paying your mortgage on time. Lenders want to avoid this as much as possible, so they will favor those borrowers with an ITIN that have a lower debt ratio.
You can buy a house with an ITIN almost as easily as someone with a social security number. You need similar qualifying factors, but with a little boost. You need to show lenders beyond a reasonable doubt that you are a good risk.