How To Get a Mortgage With No Proof of Income
You’re ready to buy a home, and you need a mortgage. You apply for the loan, and the lender says they can’t approve you because you can’t show that traditional proof of income.Verify your mortgage eligibility (Dec 9th, 2023)
One of the greatest ironies of the lending industry is the difficulty of obtaining loan funds without money. That’s because almost every lender asks for proof of income. However, companies like Priority 1 Lending provide alternatives for unique borrowers, including self-employed or commission-based, business owners, retired, and more who may have trouble showing traditional income documents. Here’s more information about no proof of income loans and how you can get one.
- What Is Proof of Income?
- What Is a No-Income-Verification Mortgage?
- When Should You Get a No-Income-Verification Mortgage?
- How Do I Get a No-Doc Mortgage?
What Is Proof of Income?
Proof of income is a document or collection of documents a lender needs to see to verify your income and determine your ability to pay back your loan in its term.
Traditional proof of income documents required may include:Verify your mortgage eligibility (Dec 9th, 2023)
- W-2 tax forms
- Payroll verification
- Tax returns
- Pay stubs
Depending on the lender, different documents are considered more authoritative than others. In most cases, it is much easier for a borrower who a company employs to verify their income, as the lender knows they have a steady income and will be able to continue earning the same amount or more. This results in a much quicker loan approval.
On the other hand, if you are self-employed or have another unique situation, you probably already know verifying your income can be a little more complicated. This is because lenders have little to no guarantee that your income level will continue, so they tend to ask for more documentation.
Granted, if you choose to work with a company like Priority 1 Lending, you may be able to get approved for a loan with little to no income verification.Verify your mortgage eligibility (Dec 9th, 2023)
What Is a No-Income-Verification Mortgage?
A no-income-verification mortgage, also known as non-QM, no-doc, and stated-income, is a home loan where you don’t need to submit traditional income documentation for approval (pay stubs, W2s, or tax returns). Instead, the lender will allow you to use other ‘documents,’ such as bank statements or assets, to demonstrate your ability to repay the loan.
Due to no-doc loans being inherently riskier for lenders than loans with standard documentation, interest rates may be slightly higher than those for conventional loans. Down payments typically require a more significant portion of the loan amount and a credit score of around 640.
When Should You Get a No-Income-Verification Mortgage?
If you are self-employed, commission-based, a business owner, retired, or otherwise have trouble qualifying for a conventional mortgage, a non-QM loan may be for you. Documenting your income can be difficult in these scenarios, which makes a no-income loan an ideal solution. Below are other unique scenarios where you could benefit from this type of mortgage:Verify your mortgage eligibility (Dec 9th, 2023)
- Your income dropped recently. If your income falls, traditional lenders may be hesitant to lend to you, especially if you are self-employed. In this case, lenders like Priority 1 Lending can provide you with a no-doc program to help you get a loan without submitting tax returns.
- Your income is irregular. If you freelance, are self-employed, or work in a sales position, your payment may fluctuate, lowering your chances of receiving a mortgage from a traditional lender. However, if you have money in the bank or additional assets, you may qualify for a no-doc mortgage.
- You wrote off business expenses in the past. A no-income-verification mortgage may be able to put you back in the market for a loan if you are an entrepreneur, and deducting expenses lowers your net income.
- You're a real estate investor. When applying for a no-doc program, investors are not required to prove their assets or income to receive financing for the property they intend to buy. It is possible to get approved based on the projected rental income alone. Generally, ability to repay rules only apply to primary residency and second home mortgages.
- You have a high net worth. You may be able to convert your assets into qualifying income with a no-doc mortgage if you have reached a point where you no longer need to work due to your high net worth.
- You file multiple tax returns. If you have multiple income streams, your tax return will likely be complicated, so a no-income verification mortgage, meaning no tax returns, might be a good option.
That being said, you should not use this type of loan as a way to conceal poor financial standing. A no-income-verification mortgage should only be considered if you can genuinely make your monthly payments.
How Do I Get a No-Doc Mortgage?
The best place to begin researching your options for these loans is by contacting a mortgage broker like Priority 1 Lending. Each lender determines its eligibility requirements based on its own risk of tolerance and the needs of its investors. Below are some common requirements for no-doc mortgages:
- Higher credit score. The credit score required for no-income-verification mortgages can be slightly higher than for a conventional loan, generally around 640+.
- Larger down payment. The down payment minimum for this type of mortgage typically starts around 20% for primary residences.
- Higher interest rates. To cover the higher risk of omitting documentation, lenders may charge higher rates, usually upwards of 1% more.
- Proof of repayment ability. You must prove that you have the resources to make payments on your loan, whether it’s bank statements, investment property rents, or a large stockpile of assets.
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If you are ready to buy a home or refinance your current one, we are prepared to make it happen. Our team of lenders and brokers is uniquely prepared to streamline your mortgage process and guide you through a successful experience.Show me today's rates (Dec 9th, 2023)