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Guide to Home Insurance Under Undocumented Status
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As an undocumented immigrant, you may struggle to get ahold of the financial products and services others are eligible for. You may fear that homeownership is outside of your reach as well, but that’s far from the case. In fact, data from the Migration Policy Institute shows that more than 3 million undocumented individuals own homes in the United States. That’s nearly one-third of the undocumented population.
An Individual Tax Identification Number (ITIN) through the IRS allows immigrants under undocumented status to pay taxes and get their hands on various financial products and services, including home loans. Some lenders specialize in these mortgages but require that borrowers obtain homeowners insurance. While the process for buying insurance may be slightly more difficult and less secure, some companies and resources can help.
When it comes to signing up for financial products, you might have a legitimate fear of your immigration status being disclosed. Rest assured that the IRS doesn’t reveal the immigration status of ITIN recipients. And organizations like the Immigrant Legal Resource Center can help you find mortgage lenders and homeowners insurance companies you can trust.
Buying a home under undocumented status
Undocumented status isn’t a barrier to homeownership. It may be more challenging to purchase a home as an undocumented immigrant. But according to immigration attorney Jessica Smith Bobadilla, it’s perfectly legal.
“There’s nothing in the law that prohibits homeownership of people in the immigration process or those that entered without a proper visa,” Bobadilla shared. “The idea is similar to any foreign national or foreign investor purchasing property in the US.”
Since most people can’t afford to purchase a home in cash, a specific mortgage exists to help those with undocumented status get a home loan — the ITIN mortgage.
Here are the steps to follow to get an ITIN mortgage:
Apply for an ITIN
An ITIN is an individual tax identification number and acts as a substitute for a social security number for those unable to obtain one. ITINs were designed to create a pathway for those of foreign status to pay income taxes. To apply for an ITIN, you can file a Form W-7 with your federal income tax return. You can also apply for an ITIN in person through a Certifying Acceptance Agent or IRS Taxpayer Assistance Center. Both of these offices are available in all 50 states, and you can find specific locations on the IRS website.
Rest assured that the IRS doesn’t share taxpayer immigration status. You can safely pay taxes and apply for an ITIN without fear of deportation.
Prepare to meet your lender’s mortgage requirements
To get an ITIN mortgage, you’ll have to meet your lender’s minimum mortgage requirements.
Those requirements may include:
- Down payment: While many mortgage lenders require just 5% down to buy a home, the requirements for an ITIN mortgage may be more strict. While the downpayment requirement will vary by lender, it will likely be in the neighborhood of 15%.
- Tax returns: Plan to provide at least two years’ worth of tax returns with your ITIN to prove income and employment.
- Credit history: You can build credit with an ITIN just as you would with an SSN. Lenders generally want to see a good credit score and positive credit history. If you don’t have a credit history, you can generally provide your creditworthiness in other ways.
- Employment: Most lenders will require you to have at least two years of employment in the same job or a similar line of work, either as an employee or a self-employed individual.
- Personal documents: Lenders will ask to see personal documents such as a U.S. Government ID Card, Matricula consular ID, or Passport.
Keep in mind that the terms of an ITIN mortgage tend to be less favorable than a traditional mortgage because lenders may see them as having greater risk and may be more difficult for the lender to sell later.
“These require at least 20 percent down and a higher monthly payment as well in some cases and carry a higher interest rate,” Bobadilla told us. “The interest rate tends to be double a typical mortgage rounding out at around 7 or 8 percent on average.”
While Bobadilla noted that a down payment of 20% is required, some lenders accept a minimum of 15% down. The specific requirement will vary depending on the lender.
It’s important to note that ITIN mortgages can generally only be used for a primary residence. Lenders are unlikely to offer an ITIN home loan for the purpose of buying an investment property.
Apply for an ITIN mortgage
Once you have your ITIN and have met the minimum mortgage requirements, you can apply for your ITIN mortgage. With a little research, you can find a variety of financial institutions that provide these loans, and some lenders even specialize in them.
Not all mortgage lenders currently offer ITIN home loans. Here are a few lenders that specialize in these mortgages and can walk you through the borrowing process:
How to get homeowners insurance
Homeowners insurance is an important financial safety net for homeowners. It helps to prevent major financial losses in the event of an accident or natural disaster. Not only that, but if you plan to borrow money to purchase a home, your mortgage lender will almost certainly require that you have homeowners insurance.
And while there’s a clear process in place for undocumented individuals to get a home loan, the process for homeowners insurance is slightly less straightforward. According to Bobadilla, insurance companies may be somewhat less inclined to offer homeowners insurance when the buyer is undocumented (or in a case where there are two or more buyers, when all of the homebuyers are undocumented).
We also spoke with Yury Mosha, owner of the company Second Passport that helps immigrants get visas and acclimate to their new environment. Mosha shared that immigration status won’t prevent you from being able to obtain homeowners insurance.
“For homeowners insurance, they are insuring the house,” Mosha shared. “The insurance company is not worried about your legal status, but about the house itself.”
If you’re concerned about obtaining homeowners insurance due to your immigration status, consider working with a mortgage lender who specializes in these types of loans. When you work with an ITIN mortgage lender, they’ve almost certainly worked with borrowers in the same situation as you. So they may be able to recommend — and may even have a partnership with — an insurance carrier that will insure your home.
Working with an insurer recommended by your ITIN home loan lender may also help alleviate any concerns that your insurance provider will share your immigration status.
“There should be no risk of immigration enforcement due to the purchase of a home or homeowners insurance,” Bobadilla said.
Considerations to keep in mind:
- As with getting an ITIN mortgage, your insurance provider may see you as a high-risk customer due to your immigration status. Therefore, your insurance rates may be slightly higher.
- Some insurance companies use credit score as a factor when determining someone’s insurance premium rates. If you don’t have a credit history due to your immigration status, your rates may be higher.
Housing support for undocumented immigrants
The federal law provides housing protections that cover every person in the United States, regardless of immigration status. Under the Fair Housing Act, it is illegal to discriminate in the sale, rental, and financing of any housing-related transaction, regardless of the victim’s immigration status. The Fair Housing Act prohibits discrimination based on national origin, meaning you cannot be denied housing because you were born in another country. Under this law, individuals cannot ask for your immigration status based on your national origin, race or color.
While federal law covers everyone in the United States, many individual states have laws or rules in place to provide even more protection or support to undocumented immigrants. 48 states and the District of Columbia consider national origin, race, and color to be protected statuses in prohibiting housing discrimination. Many states, including California, New York, and Illinois, have additional protections for undocumented renters, making it illegal for a landlord to evict, threaten, or report someone due to immigration status.
The future of immigrant-friendly housing policies in the US
The recent win of President-Elect Joe Biden in the presidential election could have implications for policies affecting housing access for undocumented immigrants. Here are a few factors that may come into play:
- As an opponent of the DACA program, President Trump’s administration enacted policies that made it more difficult for DACA recipients to receive federally-backed mortgage loans. Given President-elect Biden’s vocal support for the DACA program, this policy could be reversed.
- President-Elect Biden recently announced Alejandro Mayorkas will be heading the Department of Homeland Security under his administration. Mayorkas has indicated he will enact immigrant-friendly policies and has been vocal about his support for the DACA program and its recipients.
- The National Immigration Law Center (NILC) has created a comprehensive guide for obtaining an Individual Taxpayer Identification Number (ITIN). The NILC also offers contact information for those immigrants who may need more help filing for the ITIN.
- Though the federal government has made economic aid available to U.S. citizens during the COVID-19 pandemic, there is considerably less help available to undocumented individuals. Consumer Action, an organization that provides multilingual financial services to underrepresented consumers, has compiled a list of state, local, and private financial assistance programs designed specifically for undocumented immigrants.
- In 2019, Fannie Mae declared its support for DACA mortgage borrowers, indicating it will back mortgages for DACA recipients. Read Fannie Mae’s report on non-citizens borrower eligibility.
Planning for the future
While there may be a few more steps, there is a path to homeownership and homeowners insurance for undocumented immigrants. With an ITIN from the IRS, plenty of mortgage lenders offer ITIN home loans specifically designed for those who aren’t eligible for an SSN, without fear of your immigration status being disclosed. And if you’re struggling to get your ITIN, home loan, or insurance coverage, plenty of organizations around the nation specialize in helping undocumented immigrants obtain the products and services they need.
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