Owning a home is part of the American Dream, and as a mortgage lender we are motivated to do everything possible to make sure Americans of all ethnic, educational and professional backgrounds can qualify for a mortgage. Some borrowers may use an Individual Tax Identification Number (ITIN) instead of a Social Security Number (SSN), making it more difficult for traditional lenders to qualify them.
No Social Security Number
Borrowers without a SSN may still be working and paying taxes. However, their tax returns may not reflect their whole financial picture. Bank statements may be a better tool to determine cash flow available for housing for these borrowers.
Mortgage lenders like Sierra Lending have been working hard to develop new risk assessment models for the growing number of ITIN mortgage applicants today, and some progress has definitely been made.
We are leading the charge to make our business processes more flexible, with the goal of offering a loan to credit-worthy borrowers who can demonstrate the cash flow to be able to repay what they borrow over a reasonable loan term, whether they have an SSN or an ITIN.
Documenting their Down Payment
It is not unusual in these times of low interest rates on savings for borrowers to keep their cash outside of a bank. Or, perhaps these borrowers do not have a bank and their business or employment situation means they deal mostly with cash. In such a case, it is more difficult for them to document where their down-payment cash came from. Sierra Lending can help educate these borrowers on how to provide the proper documentation for their down payment.
Tips for ITIN Borrowers
Like anything else in life, you need to put your best foot forward when you are applying for a mortgage. If you are a borrower who uses an ITIN, you can take steps to make yourself a more attractive borrower.
In most cases, the down payment, income available after debts are paid (debt to income ratio), and credit requirements to qualify for a mortgage are virtually the same for an ITIN borrower as for a conventional borrower. The difference for the ITIN borrower is that he or she will typically have a significantly higher burden of documentation.
A conventional borrower will simply provide two years of tax returns to show income and perhaps their last bank statement to show the source of their down payment. On the other hand, an ITIN borrower will need to show at least 12 months of bank statements or other documentation of income, such as receipts from their business. And, they may also have to provide documentation as to the source of their down payment if not held at a bank.
Sierra Lending will use these alternative income sources to determine how much mortgage payment the ITIN borrower can qualify for. By looking at all the borrower’s debt as well as the alternative income sources, Sierra Lending can calculate the debt-to-income ratio for the borrower. The preferred range for a debt-to-income ratio today is around 36-43 percent.
Last, but not least, mortgage lenders like Sierra Lending are now looking to see if ITIN borrowers have significant cash reserves and look more positively at borrowers with at least a couple of months’ worth of expenses that they have saved up for the proverbial rainy day.
Interested in learning more about mortgage loans for ITIN borrowers? Contact Sierra Lending today and let us explore options with you!