Home loans easier for immigrants after lending rules change

Owning a home has long been regarded as “the American Dream”, but in the past only a few were able to realize it. Lending requirements used to be harsh, requiring 20% down payments and a solid, unblemished credit report. Times have changed and lenders have eased their policies in ways that allow most anyone, even people with bad credit, to own their own homes. Granted, the credit terms might be harsh for the credit impaired, but the opportunity is there. One large demographic group has long been left out of home ownership, however - immigrants. That is starting to change, as lenders are easing the rules for them, too.

Traditionally, buyers needed a Social Security Number (SSN) in order to purchase a home. That policy prohibited immigrants, both legal and illegal ones, from buying a home if they were unable to qualify for an SSN. Lenders, realizing that a large untapped market exists, are starting to accept applications from buyers who cannot obtain an SSN but who instead have an ITIN -

Individual Taxpayer Identification number The ITIN is a number issued by the Internal Revenue Service to people who do not qualify for an SSN. Federal law requires anyone who earns income to pay taxes, and the ITIN is a number that uniquely identifies taxpayers who have no SSN. This number is used for taxpaying purposes only, and is not used by any other Government agency, nor is it used for identification purposes. In fact, the IRS doesn’t even verify documentation provided when applying for an ITIN. It’s simply a way of keeping track of a taxpayer.

Nevertheless, more and more lenders see no reason why a hard working, taxpaying immigrant shouldn’t be able to purchase a home, and more and more of them are permitting buyers to apply using an ITIN instead of an SSN. These lenders, often working with nonprofit organizations such as Acorn Housing, have been able to help thousands of immigrants qualify, legally, for home loans.

It’s a win-win situation for everyone. Most people would rather live in a neighborhood full of homeowners than a neighborhood full of renters. Studies have shown that owners tend to take better care of property than renters, and that contributes to the overall appearance of a neighborhood. And that, in turn, keeps property values stable, and everyone benefits from that. The benefits of a mortgage for any one buyer extend to the entire neighborhood.

The program is still in its infancy, as larger banks have stayed away so far, regarding such loans as risky. Most of the loans using ITINs have come through small, regional banks. It takes time for lenders to assess the risks involved, as there have been few studies regarding the demographic groups involved. Furthermore, many of the potential buyers may have little or no credit histories. There is no law prohibiting selling a home to illegal immigrants, however, so it is only a matter of time before lenders move more aggressively into this market.