Are you having trouble getting approved for a mortgage? If it’s due to issues with your tax return or the inability to prove your income using traditional methods, a no-income verification mortgage may be ideal. Here’s what you need to know before applying.
Can You Get a Home Loan with No Income Verification?
Yes, it’s possible to secure a home loan without handing over documents to the lender to verify your income. However, you may have to do some legwork to find a lender that offers this type of mortgage since it’s not readily available through traditional banks, credit unions and online lenders.
Prior to the Great Recession of 2008, no income verification mortgages were more prevalent. But when the housing market crashed, leading to an economic meltdown, many lenders stopped offering no income verification mortgages to minimize risk. However, these home loan products have since resurfaced and are now accessible by select borrowers who meet the lender’s eligibility guidelines and can demonstrate they’re a good fit for a loan.
To find these specialized lenders, you might consider reaching out to mortgage brokers who have a broad understanding of the market and access to various lending sources. They can often identify niche programs tailored to unique borrower situations. Furthermore, some online platforms and lending networks specialize in connecting borrowers with non-traditional mortgage products, including those that offer no income verification loans.
It’s important to note that while these loans may offer a path to homeownership for those with non-traditional income, they often come with higher interest rates and may require a larger down payment to offset the lender’s increased risk.
What is a No Income Verification Mortgage?
As the name suggests, a no income verification mortgage is a home loan product that is accessible to borrowers without standard income documentation. This includes W2 forms, pay stubs, tax returns or other employment information. You should also know that this loan is sometimes referred to as a NINJA mortgage, which is short for no income, no job or assets.
It caters to self-employed individuals, small business owners, independent contractors and home buyers with a non-traditional source of income. However, be mindful that lenders still require borrowers to meet certain eligibility requirements to qualify. You can also expect steeper interest rates than you’ll find with most conventional and government-backed mortgages since no income verification mortgages pose an elevated risk to lenders.
What are the Requirements for a No Income Verification Mortgage?
It depends on the type of no income verification mortgage you select. You’ll generally need to have a good or excellent credit score and a sizable down payment of at least 20 percent. The lender also wants reassurance that you can comfortably afford to make the monthly mortgage payments and will likely request asset documents to confirm your debt-to-income ratio is acceptable.
The Role of Lenders in No Income Verification Mortgages
Lenders play a pivotal role in the issuance of no income verification mortgages. They determine if you’re a good fit for a loan using a slightly different approach than you’d find with traditional mortgage lenders.
How Lenders Assess Risk with No Income Verification Mortgages
When you seek a no income verification mortgage, lenders must rely on alternate methods to assess your ability to repay the loan.
Instead of pay stubs or W-2 forms, lenders may consider your bank statements, assets and credit history. They also employ specialized underwriting processes to evaluate your financial health and any potential risks associated with lending to you without traditional proof of income. This can involve a thorough review of your financial records and possibly a higher scrutiny of your credit score.
The use of such alternative forms of verification means that lenders assume a higher risk. To offset this risk, they might require a larger down payment or charge higher interest rates.
Finding Lenders Who Offer No Income Verification Mortgages
It can be challenging to identify lenders offering no income verification mortgages. You can start with an online search to compile a preliminary list of options, but you’ll likely need to do a bit more research to find several options.
Consider consulting with real estate agents and financial advisors who may know of mortgage lenders offering these specialized products. Mortgage brokers are also a great point of contact as they may also have contacts in their network who can refer you to reputable lenders who can potentially meet your mortgage needs.
Pros and Cons of a No Income Verification Mortgage
Below are some key benefits of no income verification mortgages:
- You won’t have to provide income documentation.
- Your debt-to-income ratio may not stop you from being approved for a loan.
- You could be eligible for a loan even if you took several write-offs in recent years.
- If your annual earnings have trended downward over the past few years, you may still be approved for a loan.
- It’s easier to acquire rental properties if you’re a real estate investor.
Unfortunately, there are also drawbacks to consider before applying
- You can expect higher borrowing costs.
- The minimum down payment requirement is steep.
- You’ll likely need good or excellent credit.
Who is an Ideal Candidate for a No Income Verification Mortgage?
As previously mentioned, no income verification mortgage loans accommodate individuals who may find it challenging to provide standard proof of income through tax returns or pay stubs. These candidates have legitimate income sources but require a bit of flexibility to get approved for a mortgage.
Self-Employed Individuals and Business Owners
If you’re self-employed or own a business, you understand the difficulty of presenting traditional income documentation. A no income verification mortgage considers your financial profile without relying solely on tax returns, making it a fitting option for self-employed borrowers.
Freelancers and Independent Contractors
As a freelancer or an independent contractor, your income may fluctuate, and you might not have consistent paychecks. With a stated income loan, your bank statements can often substantiate your income, serving as an alternative to the standard W-2 forms.
Real Estate Investors
As a real estate investor, your property earnings can be irregular or lumped into annual payouts, not reflecting true monthly income. No income verification mortgage loans consider your cash flow from investments, offering flexibility in how your income is verified.
Those Who Earn Irregular Income
Individuals with irregular income streams, such as those in commission-based roles or with varying pay scales, may benefit from a mortgage that evaluates more than just consistent paychecks. Assets and bank statements can play a key role in these cases.
Those Who Possess a High Net Worth But No Currently Employed
For those with a high net worth yet no current employment, traditional income documents won’t apply. Instead, a lender may review your liquid assets and overall financial status via a stated-income approach to determine your eligibility for a mortgage.
Where to Get a No Income Verification Mortgage
You’ll have to do a little research to find a reputable lender that offers no income verification mortgages. Fortunately, we’ve done some of the legwork for you and discovered Angel Oak Mortgage Solutions, a full-service mortgage lender providing innovative mortgage loan products to prospective homebuyers with varying financial backgrounds.
Its no-income verification mortgage offerings include:
- Bank Statement Home Loans: This mortgage product caters to self-employed borrowers looking to purchase a home (primary, second or investment property) or refinance their existing loan. You can use personal or business bank statements in lieu of tax returns to qualify for a mortgage between $150,000 and $3 million. At least two years of self-employment experience is required, and you’ll need to provide 12 or 24 months of bank statements. A 1099 income option is also available to select borrowers.
- Investor Cash Flow Loans: You won’t need to provide employment or income information to be eligible for an Investor Cash Flow Loan. Instead, Angel Oak Mortgage Solutions will calculate the projected cash flow or rental income on the investment property you’re looking to purchase to determine your eligibility for funding, which could be between $75,000 and $1.5 million. You’re permitted to purchase several properties with a single loan, and they can be placed in the LLC‘s name. Be mindful that you must own a primary residence to qualify for a loan.
Or if you’d like to explore more traditional home loan products, Angel Oak Mortgage Solutions also features:
- Conventional Mortgage Loan: This traditional mortgage can be used to purchase a single-family home, townhome or warrantable condo. Or you can use it to refinance your current mortgage. It’s relatively flexible, and several down payment options are available to eligible applicants.
- FHA Home Loans: Backed by the U.S. Federal Housing Administration (FHA), this home loan may be accessible to you with a down payment of just 3.5 percent. Furthermore, the minimum credit score requirement is generally lower than you’ll find with conventional home loans, and you can receive up to 6 percent in seller concessions.
- USDA Home Loans: If you’re planning to buy a home in an area that’s been designated as rural by the United States Department of Agriculture (USDA), this type of loan could be ideal. You could be eligible for 100 percent financing to purchase a home or refinance, but income and household size limits apply.
- VA Home Loans: These mortgages cater to both current and retired members of the armed sources and qualifying relatives. It also offers to finance up to 100 percent, and you won’t pay monthly mortgage insurance premiums.
There’s also a Portfolio Select Home Loan that’s accessible to borrowers who’ve experienced and have since recovered from serious credit events. So whether it’s a foreclosure, bankruptcy, short sale or deed-in-lieu, you won’t have to put your homeownership or refinance dreams on hold for several years.
Or if you need a jumbo loan, there are three jumbo loan options to choose from:
- Gold Prime Jumbo Loan: Borrow up to $3.5 million with a debt-to-income ratio as high as 50 percent. You can use the loan proceeds to purchase a primary, second or investment property with as little as 10 percent down.
- Prime Jumbo Loan: The maximum loan limit for this mortgage offer is slightly lower at $3 million.
- Non-QM Platinum Jumbo Loan: You can also borrow up to $3 million to purchase a property with this loan product. Even better, you could get approved for financing with just one tax return.
When you’re ready to take the first step towards securing the right mortgage product for your financial needs, submit an online inquiry.
Frequently Asked Questions (FAQs)
Typically, no-income verification mortgages come with higher interest rates than traditional home loans. Lenders view these mortgages as riskier because they lack the usual income documentation, like pay stubs or W-2 forms. To offset this risk, financial institutions may assess a steeper interest rate.
