Loans without income verification are a dream for those who are self-employed or who have no regular means of income. Can you imagine applying for a loan where the lender doesn’t ask you for proof of income?! In the early 2000s, borrowers could apply for such a loan and naturally, scores of individuals defaulted. As a result, you have to search long and hard to find an institution willing to fund such a loan today.
Nonetheless, you may be able to find certain qualified individuals who will hand you such a loan as long as you meet certain criteria.
People who lend loans without income verification.
There are a few intrepid individuals who are willing to take on the risk of financing these unconventional loans. The funds come from their own pockets and are capped at a million or two – depending on the lender. Most lenders will only lend for 3-5 years. Sometimes, they may dole loans out in packages. You borrow one, they give you another upon return. The benefits of such loans, of course, are that they overlook spotty income history. In fact, that is why you’re getting them in the first place. The negatives are that these atypical loans come accompanied by high interest rate to offset the risk.
So how can I get one?
Even if you were self-employed all your life, you may still find a lender who will lend you this kind of loan, but you need one thing: an impeccable credit score. You also need to be prepared to plunk down a significant down payment that can be double (sometimes, almost triple) that of the traditional loans. So if your conventional mortgage loan was 6%, expect a 10%-12% unconventional percentage plus repayment loans and prepayment that hover in the thousands. These high rates intimidate many from applying: payments are higher and risk of defaulting equally as high.
If you’re determined to persevere, here’s some suggestions that can help you:
Make sure you can afford it. Certainly there’s a Dodd-Frank law that punishes lenders who exploit penurious individuals. (They get their money back and taken to court), but you can find yourself in trouble if you sort-of-somehow can afford it – almost. The history of lending has seen too many people who pursue the chimera of buying and reselling attractive houses imagining clusters of dollars in their brain. They borrow funds rationalizing that they can repay and find themselves toppling into bankruptcy. You may want to earnestly and realistically purview your situation. Can you afford that repayment and rate?
Look at your income. Yes, we all wish we make higher than we do, but are you actually making the amount that you stated, or is this merely income that you sort of make once in a while? Are you consistently able to make enough so that you can go through with the loan without defaulting?
Review all the additional fees such as taxes, mortgage insurance and fire insurance. Factor in trash collection, maintenance, utility costs and other fees associated with the home. Have a look at the entire picture – leave nothing out. Can your income and bank accounts wrap it all?
Frankly, your best bet may be to go the traditional route and solicit a conventional loan from the bank or credit union or other such-like lending association. Compare the costs of a no verification loan to a regular loan, then ask for a “needs” list from your lender. The needs list will provide you with a list of documentation required to qualify the loan. You may find the list to be not as long as you thought. Yes, you may have to sign several days’ worth of documents, but interest and closing costs are lower… And for many that’s the bottom line.
More important than almost anything else is to persevere in finding a honest and qualified broker who has the patience to explain nuances to you howsoever long it takes. A good broker will help you make the right decision and give you the low-down of the territory. The broker, in fact, may be one of the most crucial pieces of the loan process so make sure that he is certified, highly recommended, and honest. Google research and maybe networking will help you if you have any questions.
It’s that much harder to get a mortgage when you’re self-employed and it definitely means planning to step outside of conventional financing. Lending standards are tough. Even people who qualify for a home loan, find it strenuous to get one today. Borrowers typically have to provide two years’ worth of tax returns, which often don’t accurately reflect the take-home pay of self-employed people. Some lenders understand; but few do. What to do then? The “no-doc” and “stated income” home loans or alternative income verification loan – albeit loans without income verification – may be your best solution. Niche lenders offer these. You’ll need a high credit score (the mean is 620). Maximum loan-to-value is 75 percent up to $1 million and 65 percent to $2 million. The interest rate is about 1 percentage point higher than a conventional fixed-rate mortgage, and it is structured as a 5/1 adjustable-rate mortgage.
In California alone, there are 1.7 million self-employed borrowers who can’t get financing. Experts believe that these ‘no doc’/ ‘stated income’ loans are a fixture of the future. How do they appeal to you?