ITIN is the acronym for Individual Tax Identification Number and is issued to Foreign Nationals and can be used in lieu of a social security number when a non-permanent resident alien applying for credit, employment and other areas where a social security number is required. For example, an individual wants to buy a home and get a mortgage. Traditional mortgage loans require an established credit history. When someone applies for credit, the creditor needs to identify the applicant and review a credit report. When applying for credit, a social security number is required as the identifier and the number credit agencies use when reporting payment patterns on current and previous credit accounts as well as to provide credit histories to creditors when needed.
The ITIN program was developed to allow non-permanent resident aliens buy and finance a home but use a different approach as it relates to a social security number. Such individuals apply for an ITIN directly with the Internal Revenue Service. This number can then be used to qualify for an ITIN loan. Those with an ITIN may have had excellent credit histories in their countries of origin but may not have an established credit history here in the states. If there are credit accounts that appear on a credit report using an ITIN number instead of a social security number, I can use those accounts to qualify you.
If there are limited or even no accounts listed on a credit report, we can use what is called “non-traditional” credit. Such credit is considered monthly obligations where payments are required but won’t appear on a credit report. Examples of non-traditional credit include 12 months of timely rental payments, installment loans not listed on a credit report, utility bills such as a phone, electricity or others, automobile and renter’s insurance payments and child care expenses. When approving an ITIN loan, there needs to be at least four such non-traditional accounts with a timely payment history over the previous 12 months. As it relates to other types of credit, if there are any existing tax liens they must be settled and released. If there is a bankruptcy, it must have been discharged at least three years ago with good credit reestablished.
Income will be documented in a traditional fashion which includes verification of at least two years of employment, typically with the same employer, a written verification of employment, most recent pay check stubs covering 30 days and the last two years of W2s. Federal income tax returns for the last two years are also required and if self-employed, business tax returns as well. The minimum down payment for an owner-occupied, single family home is 20% of the sales price of the home. ITIN loans can also be used to finance investment property and require more down payment. And finally, all ITIN borrowers must successfully complete an approved Home Buyer’s Course.
Most lenders don’t offer the ITIN program and those that do don’t understand how they work. But I do. If you or someone you know is a Foreign National and needs to finance a home using their ITIN number, call me and I can explain this simple process.