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Non- QM Loans: ITIN Loan Programs

Foreign nationals, resident aliens, and non-resident aliens have ITINs (Individual Taxpayer Identification Numbers) rather than SSNs (Social Security Numbers). Mortgage loans for these individuals are generally considered ITIN Loans. ITIN Loan Programs make it possible for foreigners to purchase land in the United States. The process is a little more complex than a traditional mortgage, but not unusual.

Can a Foreigner Purchase Land in the United States?

There are no restrictions on buying and selling land in the United States. A foreigner in another country can purchase land in the US, as can a foreigner who resides within a country. Where restrictions emerge is in acquiring mortgage loans. Many mortgage loans are designed with citizens in mind, and many of the required qualifications (such as a US credit score) favor citizens.

A foreign resident of the United States can purchase land in the United States through specialty mortgage programs. These mortgage programs are usually non-QM, which means they’re non-qualified mortgages. They aren’t mortgages that are federally backed. But that doesn’t mean they’re riskier or more expensive by default; it just means they don’t meet the specific federal standards.

What Is an ITIN Loan?

An ITIN loan is a loan for anyone who cannot have a social security number. ITIN loans have been used by undocumented individuals, as well. It’s harder to find an ITIN loan for an owner occupant than it is for an investor. 

To qualify for an ITIN loan:

  • You must be interested in living in the property. ITIN loans are for owner-occupants, which is why they’re commonly used by undocumented foreigners who are interested in living permanently in the United States.
  • You will need a higher down payment than a conventional loan. You may need around 15% down payment for an ITIN loan, whereas other loans (such as FHA loans) might need only 3%.
  • You will likely pay higher interest rates than conventional mortgages. The lender fees involved may also be higher. QM loans have capped investment fees, whereas non-QM loans can charge more.
  • You will need to show a reliable income. Usually, that means about two years of being employed with the same employer or being able to show reliable self-employment income. You can show this through bank statements, pay stubs, or tax returns. You will also usually need to show tax returns under the ITIN number furnished.

Depending on the lender, you may be able to negotiate more favorable terms. However, in exchange for the above qualifications, ITIN loans can be quite flexible. ITIN loans don’t require any documentation of citizenship or a social security number. They also often don’t require credit, since a credit score is also tied to a social security number. When the ITIN loan is completed, it will be like a traditional mortgage loan: a 30-year term, usually fixed rate.

What’s the Difference Between an ITIN Loan and a Foreign National Loan?

Foreign National Loans are very similar to ITIN loans, in that they don’t require traditional credit scores, require a higher down payment, and are open to foreigners. The difference is what is being done with the property. With a Foreign National Loan, only investors are allowed. With an ITIN loan, only owner-occupants are allowed; you must intend on actually living in the property.

For an ITIN loan, this reduces the risk for the lender. Individuals who live in their properties are less likely to default on a loan than individuals who are merely investing in a property. ITIN loans have lower down payment requirements than Foreign National Loans for this reason.

Are There Alternatives to an ITIN Loan?

An ITIN loan is generally for those who are not documented. For resident aliens, an FHA loan can be acquired. FHA loans are easier to get. Nearly every major mortgage servicer providers FHA Loans, and they can be acquired with as little as 3% down. Thus, a lawful resident alien is better served to try to get an FHA loan or another non-QM loan than an ITIN loan.

If you’re an undocumented resident in the United States and you want to purchase a home, an ITIN Loan Program is likely going to be the way that you do it. These loans are available to anyone with an ITIN, you just need to have filed tax returns and a regular income. As long as you can provide that (and a down payment), you should be able to qualify.

The primary challenge with an ITIN Loan Program is the fact that they are rare. Because they’re most frequently used by undocumented individuals, many banks refrain from providing them. You may need to shop around to find a favorable loan.

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