If you are not a US citizen, you might not have a social security number. In the past, people without a social security number could not obtain any financing. Today it is a different story, though as long as you have a tax ID number. This is not to say the process is easy without the social security number, but you can do it with a little work.
Verifying your Credit
The first step a lender will require is to determine your credit score. This might be the start of your hard work if you do not have official credit to offer. If you have not held several credit cards or loans from a bank, you will not have a credit score assigned to your ITIN. This does not mean you cannot secure a mortgage, though. Many banks allow the use of non-traditional credit. This means vendors you pay who do not report to the credit bureaus. A few examples include:
- Insurance companies
- Schools (tuition)
- Utility companies
The lender needs to verify with these vendors the amount you pay to them each month and how often you paid them on time. The lender is usually concerned with the last 12 months. They will want the proof of your timely payments in writing in order to ensure the validity of the statement the vendor makes. You will also need to provide your canceled checks to show the payments came from you and the date you originated them.
Building up Credit
If you do not have any traditional or non-traditional credit, you need to start building it up. Department store credit cards and secured credit cards are the best option. You don’t need a vast credit history or many resources in order to secure either of these types of cards. Secured credit cards require you to put a deposit down. For example, if you put down $500, you have a $500 credit limit. If you do not make your payments, the creditor can take the money from your down payment. This way they are not at risk and you get a chance to build up your credit.
In order to ensure a positive impact to your credit score, make sure to make your payments on time. You should also try to pay off as much of the credit card as possible. The less you have outstanding, the better your credit score reacts. Of course, you need to continue using the credit so the credit bureau has something to rate. If you have open credit but never use it, your credit score will not change much.
Create an Employment History
Another key factor in any mortgage application is the employment history. Lenders always want to see stability in your employment and your income. In the case of the mortgage with a Tax ID number, your employment is even more important. Lenders want to see at least a 2-year stable history. In general, the lender needs to see that the income will continue for the near future as well. This generally means the next 3 years, but it is hard to predict how long you will keep a job. As long as your employer can verify your start date; your present employment; and your income, it can help you obtain the mortgage without a social security number.
The method the lender verifies your employment must be official too. Even if you are not required to file tax returns, there are other ways to validate your income. They include:
- Verification of Employment in writing
- Paystubs from your earnings
- Letter on official letterhead from your employer
The employer must also make a statement regarding the probability of your continued employment in order for you to qualify for the loan.
Another compensating factor when you try to apply for a mortgage with a tax ID number is to have plenty of assets. These assets can be used for your down payment, the closing costs, or as reserves. If you use them as reserves, the lender will count them by the number of mortgage payments you can make with the savings. For example, if your new mortgage payment equals $1,000 and you have $5,000 in savings, then you have 5 months’ worth of reserves. Obviously, the more you have saved, the better you look to the lender.
These factors can help you obtain a mortgage with a tax ID number. As long as you can prove the same factors an applicant with a social security number would prove, you are on the same level. The more compensating factors you have for the lender, the better off you will be. Typically, lenders want to see a positive credit history, whether traditional or alternative, plenty of reserves, and stable employment/income. As long as you can prove those things, you are on the same playing field as an application with a social security number.
The one factor that is outside of your control is the value of the home. The lower the value of your loan is to the value of the home, the less risk the lender takes. For example, if you borrow 80%, you have 20% invested in the home. This gives the lender confidence that you will try as hard as you can to make your payments. On the other hand, if you borrowed 95% of the value of the home, the lender has more at stake because your investment is lower.
Take your time and build up your application as best you can before applying for a mortgage with a tax ID number. It is possible to obtain a loan, but you have to make sure you have all of the qualifying factors to prove you are not a high risk.
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