When you apply for a home loan, we need to document that you have enough income to repay the money you are borrowing. If you are self-employed and your income is tricky to document, there are viable mortgage programs that don’t require traditional tax return documents.
In the past, you may have heard terms like no-doc loans; no income verification mortgages; and stated income loans: all of which are misnomers by today’s standards. These were the programs that contributed to the 2007 and 2008 bond market and real estate crash. Today’s mortgage options include more consumer protections and are more accurately called Alternative Documentation Loan Programs or No Tax Return Mortgage Programs.
No Tax Return Mortgage Programs
Let’s be clear, just because you don’t have to produce a tax return, doesn’t mean you are not documenting your income. Instead of tax returns, you will be providing bank statements, asset statements or 1099s to demonstrate cash flow and your ability to pay back the money you are borrowing. You’ll want to have a good credit score of 680 or higher. Let’s dig a little deeper….
Bank Statement Mortgages
These programs are designed for self-employed borrowers by permitting the use of bank statements in lieu of tax returns. Who is the best fit: Self-employed home buyers who run all of their business income through their business bank statements to easily track their deposits.
We normally collect and review the deposits on 12 to 24 months of personal and/or business bank statements, to determine your cash-flow. This deposit history documents your qualifying income and ability to pay back the amount you are borrowing.
Borrowers who are independent contractors, freelancers, or otherwise self-employed in the “gig economy” may be a good fit for 1099 Mortgages because they normally receive 1099 statements from their clients/employers. We will use 1099s in lieu of tax returns. We normally collect and review 12 to 24 months of 1099s to determine your qualifying income and your ability to pay back the amount you are borrowing.
Asset Qualifier Mortgages
This program is best for home buyers who don’t have enough traditional income to qualify but have lots of savings and investments that can easily be converted to monthly cashflow.
The more technical term is an Asset Depletion Loan. Maybe you have a high net worth but no job. Maybe you are retired. With an Asset Qualifier Mortgage, we use a percentage of your savings and investment accounts as a potential source of income to qualify. Here is an example: If you have $1,000,000 in assets and we divide by 240 month (20 years), that is $4,166 per month that can be used to qualify you for a mortgage. Note: the net assets use to qualify are less the funds needed to close.
Are these programs safe?
If you have the necessary income/ cash-flow to repay the amount you are borrowing, then the mortgage is as safe as documenting your income with a traditional tax return. Regardless of how you document you loan application, it’s important to be truthful with your application so our underwriters can assess your qualifications accurately.
Can I get financing for a home with no income?
Not really! You need income to make your monthly payments unless you have lots of saving to draw against.
What loan does not require proof of income?
Only Asset Qualifier mortgage programs don’t require income. Of course, you’ll need to document you have a high net worth to draw against over an extended period of time.
What is a no-income verification or no-doc mortgage?
No-income verification and no-doc loans have a deservingly bad reputation for contributing to the 2008 real estate market crash. These programs don’t exist the way they once did. Today’s mortgage options include more consumer protections and are more accurately called Alternative Documentation Loan Programs or No Tax Return Mortgage Programs.
Can I get a mortgage if I get paid in cash?
If you get paid in cash and deposit the said cash into your business bank account, then you can use the bank statements to document your income. You’ll need to verify the existence of your business for at least 2 years.
Can you get a mortgage without a job or a source of income?
If you have enough assets, you can qualify for a mortgage using our Asset Qualifier Program.
How much do I need to make to buy a house?
There is no minimum income requirement to be a homeowner. You need to provide documentation that you have enough income to be able to repay the amount you are borrowing.
What does my credit score need to be?
Every program has its own credit score requirements. On some of our government programs you can have a credit score as low as 600. On alternative documentation loan programs, you’ll want to have a least a 660 middle FICO score.
Are you self-employed and trying to figure out the best way to qualify for a mortgage? It starts with a phone conversation to discuss your financial details. From there, we’ll explain what your best mortgage program choices will be and how much home you can qualify for. If you’re ready to explore mortgage qualification, just email me to set up a call.