Illegal Immigrants Buy Real Estate and Get Mortgages with ITIN
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Undocumented immigrants are able to buy homes with ITIN. Many illegal immigrants come to the United States to achieve the American dream. Part of the American dream is to purchase a home and to increase one’s financial well-being. In the past, some immigrants may have turned to family members or close friends who were in the United States so that they could legally obtain a mortgage for them. Today more immigrants are able to obtain mortgages on their own without having to turn to family and friends. Because mortgage companies do not require buyers to have a Social Security number to purchase a home in the United States, non-citizens now have more opportunities. Immigrants wanting to buy a home need to have a special tax ID referred to as the ITIN. An ITIN, or individual tax identification number, is proof that an individual pays taxes to the IRS or Internal Revenue Service. The IRS began issuing ITINs in the mid 1990s for individuals who were not eligible to obtain a Social Security number but needed to declare their income and pay taxes. Obtaining an ITIN, a nine digit number for tax purposes, is a relatively easy process since legal residency in the Unites States is not a requirement. A large number of illegal immigrants seeking to become
permanent residents obtain ITINs in order to show the USCIS in the future that they have been paying taxes while residing in the United States.
Immigrants may qualify for a mortgage, but this opportunity does not necessarily translate into an easy process. Mortgage companies typically use the Social Security numbers of applicants to run credit histories. However, many who apply with an ITIN do not have an established credit history or any credit history at all. Cash is widely used by immigrants and most of their transactions will most likely not involve credit. As a result, the approval for a mortgage loan may take longer and be more expensive. Immigrants applying for a loan must show proof of income. In addition, they have to prove that they have been consistent with bill paying. Mortgage companies tend to take higher risks with immigrants and this risk may be leveled off with a higher mortgage interest rate. Illegal immigrants cannot obtain loans that qualify for repurchase or are insured at the federal level by corporations sponsored by the government. These types of loans tend to offer the lowest interest rates available and lower down payments. Even though illegal immigrants usually end up paying a higher interest rate when using an ITIN, a larger down payment is usually not required on their behalf. However, some mortgage companies may require 20% to 30% of a home’s price as down payment. Such a high rate makes buying a home for many immigrants out of their reach. It is also possible that some immigrants may get lucky and be able to obtain a favorable interest rate.
Some of the companies that are offering mortgages using ITINs instead of a social security number are Citibank, Washington Mutual, and American Home Mortgage. For example, Citibank requires an ITIN, a bank account, credit references for two years and verification of residency in the U.S. for a period of two years. There is large potential for profitability for mortgage companies and banks due to the high number of illegal immigrants desiring to buy a home. Offering such loans also allows companies to start building relationships with immigrants who may become potential customers for other services in the future. However, the downfall is that these loans entail greater risks to the companies due to the lack of credit history of immigrants. More applicants who are using ITINs as compared to using SSNs (Social Security Numbers) may be rejected for mortgage loans because of the additional requirements in place of the normally established credit history. Illegal immigrants must also keep in mind that while they can obtain an ITIN number, they are still not eligible to obtain a SSN. As mentioned before, obtaining an ITIN may be useful in the future when applying for permanent residency in the United States. Having an ITIN shows that an individual has been paying taxes on their income earned in the United States, which is one of the criteria that is looked at by the USCIS if applying for citizenship in the future.