How to get a home loan in the U.S. as an undocumented immigrant

For many, homeownership is the American dream. But for immigrants who are undocumented, the feat can feel nearly impossible.

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Traditional loan programs aren’t an option for these hopeful homeowners, and they may lack the cash to buy a home outright. Their credit history — a key part of most mortgage applications — could also be lacking compared to other home buyers.

“Undocumented immigrants and non-citizens have several obstacles when trying to buy a home,” said Rosa Galarza, a licensed real estate agent with eXp Realty, via email. “There are usually more issues than when we work with U.S. citizens.”

Still, buying a home isn’t outright impossible for undocumented immigrants. Though they aren’t U.S. citizens, they do reside in the U.S. and have certain rights — including the right to become a homeowner if they so choose. Here’s how these U.S. residents can buy a house despite the many challenges they face along the way.

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Getting a mortgage can be difficult for undocumented immigrants. For one, many loan programs require a Social Security number — something the undocumented do not have. (You generally need to be authorized to work in the U.S. to apply for an SSN).

“A Social Security number is typically required for mortgage applications,” Galarza said. “Without one, the dynamics of securing a loan significantly changes.”

Many immigrants also have limited or no credit history — a key factor lenders consider when processing loan applications and setting a borrower’s interest rate and terms.

“Lenders often rely on credit scores to assess risk, and undocumented immigrants may have limited or no credit history here in the U.S., making it difficult to qualify for traditional mortgages,” Galarza said. “However, the lack of credit history does not necessarily indicate a lack of financial responsibility. Many immigrants prioritize paying their mortgages, rent, and other expenses diligently.”

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Finally, Galarza explained that undocumented immigrants can also have trouble with the employment verification step of the mortgage process. This is crucial to showing a lender that you can afford your monthly payment and pay it on time consistently.

“Because of this, lenders may require larger down payments from them to offset the higher risk,” Galarza said.

Dig deeper: Can you buy a home with no credit history? Yes — here’s how.

Undocumented immigrants may face hurdles on the path to homeownership, but there are still ways to make that American dream a reality. Buying in cash, for example, can help circumvent the challenges that come with mortgage financing and allow immigrants to buy a home with few hiccups (though saving up that much can be difficult in itself). If that’s not an option, you can explore the following possibilities:

ITIN loans are mortgages that don’t require a Social Security number. Instead, they require an applicant’s ITIN, or Individual Taxpayer Identification Number. Anyone can apply for an ITIN with the Internal Revenue Service; you’ll simply need to fill out an ITIN application form and provide some supporting documentation, like your passport or national ID card.

“When undocumented immigrants have an ITIN, it can help them tremendously,” Galarza said.

ITIN loans are a more specialized type of mortgage, so not all lenders offer them. Since they’re considered higher risk, they often require higher down payments and charge higher interest rates than other mortgage options.

Learn more: ITIN loans — How to get a mortgage as a non-U.S. citizen

Yahoo note: Want to learn more about mortgage lenders that offer ITIN loans? Read our Guild Mortgage review and Flagstar Bank review to see if either seems like a good fit.

Immigrants may also be able to get loans from friends and family members to buy a home. These are typically referred to as private home loans.

With private loans, there may be more room for negotiation, so you could get a better interest rate or terms than you would from a traditional lender. Just make sure you have the proper legal documentation of your loan, such as a promissory note or deed of trust, before moving forward. This will ensure both you and your private lender are legally protected.

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Aside from exploring alternative mortgage options like ITIN loans or buying in all cash, there are other steps undocumented immigrants can take to ease the path toward homeownership.

For one, you can spend time building up your credit. This can make it easier to qualify for a mortgage (most ITIN loans require at least a 640 score) and even get you better terms and interest rates. One way to establish credit is to open a credit card and pay off the balance monthly.

“In some cases, it’s just a matter of having the borrower open a credit card or two so they can begin to establish a credit history,” said Darren Tooley, loan officer at Union Home Mortgage, via email. “Depending on the type and number of tradelines opened, it can take three to six months for the credit bureaus to start reporting a credit score.”

If opening your own card has you worried — or you can’t qualify for one — you can also ask to be added as an authorized user on someone else’s card. Choose someone you know who uses the card responsibly and makes their payments on time. You can also explore secured cards, which work on a deposit-based system, allowing you to spend up to a certain amount each month on your card, thus building up your credit over time.

These are a good option for “… people who are trying to establish or reestablish a positive credit history,” Tooley said.

Finally, bring a large down payment to the table (at least 15 to 25% for an ITIN loan) if possible. You can also consider adding a co-signer to your loan application. This person agrees to make payments if you fail to, and adding a co-signer lessens the risk you present to lenders. It also allows the co-signer’s income, credit, and financial profile to be factored in when processing your loan.

“If the amount of income you make is not enough to qualify, adding a cosigner may help,” Tooley said.

Dig deeper: Co-signing for a mortgage — The process, risks, and alternatives

Undocumented immigrants can’t get traditional mortgage loans, but they may be eligible for some non-traditional loans. ITIN loans, for instance, only require an Individual Taxpayer Identification Number and may be an option for the undocumented.

To be eligible for a federally-backed mortgage loan, an immigrant must be a legal permanent or non-permanent resident of the U.S. The same is true for conforming conventional mortgages.

Yes, immigrants can get an FHA mortgage loan if they are legal residents of the U.S. You must be a permanent or non-permanent resident with a Social Security number and the right to work in the U.S. to qualify.

This article was edited by Laura Grace Tarpley.