6 steps to getting a mortgage loan in California only with your ITIN
California real estate market is open for anyone willing to buy a property, but most people need a loan to do so. Usually, loan lenders require a valid social security number, but there is a way around it. Individual Tax Identification Number (ITIN or Tax ID) is the only other processing number that can get you qualified for a loan in the US.
Since we know there is misinformation about getting a mortgage without SSN, we made a step-by-step guide to help you start and finish the homebuying process. Whether you are a foreigner or an American living abroad, this could apply to you.
Tax ID Loans
First things first, let’s introduce the term Individual Tax Identification Number (ITIN) or Tax ID. It is a tax processing number for lawful permanent and non-permanent residents of the US. ITIN is used to keep track of the tax-paying activities of US residents who do not possess a social security number.
Using that number, a lender can ensure you are a creditworthy borrower who will not default. Loans that require only a Tax ID are not as often, and requirements vary by state and individual lender. For example, to be qualified for the ITIN mortgage loans in California, you need to have a minimum of 20% down payment and two years of work in the same field, either self-employed or a salaried worker. Self-employed residents need to show two years of tax returns. You often do not need a credit score to qualify for the ITIN mortgage.
You can get a loan to finance single-family homes, townhouses, condominiums, or 2-4 unit residential properties. Most lenders approve loans for primary residences, so it might be harder to find ones that will work for you if you are looking for an investment property as a secondary residence.
1. Receive an Individual Tax Identification Number
Before we start talking about home buying, you need to make sure you have a Tax ID. Collect the required documents proving your identity and residential status, and fill out the W-7 form. After that, apply to the IRS and wait for it to be processed and approved.
This process can take up to a month and a half, but you have your ITIN and the right to apply for a loan in the US once it is done. Note that you cannot make the ITIN application online, so you need to find a local IRS Taxpayer Assistance Centre and do it by mail or in person.
2. Estimate What Is Affordable for You
Estimating affordability means defining how much money you can set aside each month for homeowning costs. Most professionals advise against spending more than 30% of your monthly income on mortgage payments, so you need to calculate the loan amount plus the current rate and divide it by the length of the loan.
The more expensive the house, the higher down payment is required, but you also need to count in the additional fees such as real estate taxes, insurance, and other potential costs. Assessing the budget will tell you precisely what you dispose of, which will be helpful during the negotiation process.
3. Apply for Pre-Approval Early
As soon as you establish your budget, apply for preliminary approval and work with your ITIN mortgage lender on the maximum loan amount. Early pre-approvals will help you compete in the market by demonstrating to sellers that you are working with actual numbers and are ready to buy.
Moreover, pre-approval helps your real estate agent find and select the property with higher precision. If your real estate agents know what you dispose of and what you are looking for, your chances of finishing a home buying process are much higher.
4. Gather Documents and Do the Paperwork
Be ready to deal with a lot of paperwork when applying for an ITIN loan. Requirements are similar in the US. In California, you need identity verification, income statements, assets, a valid US visa, employment verification, and residency history. Lenders might ask for some additional information, depending on your unique circumstances. Additionally, the documentation might vary depending on whether you are a permanent or temporary US resident.
5. Lock Your ITIN mortgage Rate
Assuming that you have searched through the market, found the property, and made an offer, it is time to set the down payment and the loan terms. Your lender will give you an estimate of the mortgage loan amount and your potential monthly payments.
You can negotiate the lender’s offer if you think it could be fairer, and once you sign the loan estimate, you should lock your interest rate, and the approval process begins. Interest rates on ITIN loans are not as low as FHA rates but are still in the lower percentile than jumbos. The interest rate will depend on the current market state but also the amount of your down payment and creditworthiness.
6. Underwriting and Closure
The underwriting process happens after you submit your application and sign the Loan Estimate. During this time, an underwriter checks your borrowing credentials and the truthfulness of the data in your application. If everything checks out, your loan application will be accepted.
An underwriter will also appraise the property to determine if the property is worth what you’re paying. Underwriting protects you and the lender from any scams and risks that could happen if you decide to sell the house in the future.
The end of the underwriting process marks the beginning of the closing process, starting with you getting a copy of the Closing Disclosure. When you sign the final document and transfer the ownership, you are an ITIN loan borrower and a homeowner.
Tax ID Is Not a Work Permit
An ITIN is just a tax processing number, and it does not refer to immigration status, nor does it provide employment authorization. You can buy a house if you own an ITIN, but work visas are something else, and the two should not be mixed.
Additionally, it should be noted that you can acquire a social security number if you have an ITIN, but there are many criteria and requirements. Still, an ITIN and regularly paid federal taxes are enough for a home loan.