Getting a Mortgage With No Income Verification
For self-employed individuals, income verification can be a difficult part of the mortgage hunting process. Many lenders require detailed records, tax documents, and so on to show your annual and monthly income - but for some self employed people, especially those that work in "cash businesses," such documentation isn't readily available. Fortunately, some lenders still offer no income verification mortgages (sometimes referred to a "no doc loans"), but they aren't as easy to come by as they once were. First, you'll have to find a lender willing to provide such a mortgage, and that may take some shopping around. Be up front about your needs, and don't give up after just a few potential lenders. Keep looking, and you'll find the mortgage provider you're looking for! Now, the other parts of securing a mortgage without income verification are critically important- and not necessarily easy to achieve. Without documentation to show your income, your lender is taking on quite a bit of risk, and will therefore require some other qualifications. These typically fall into three major categories: 1. Down Payment
One of the most important components of qualifying for a no doc mortgage is having a sizable down payment - often 20% of the total price of the home or more! The larger the down payment, the smaller the total amount of the loan. Without a significant down payment, you may not be approved for the loan, or be approved with substantial fees, high interest rates, and so on. So, if you know you'll need a mortgage without income verification, it's essential to put in the effort to save for your down payment. Save up as much as you can, as the bigger the down payment, the more likely you are to find a lender to approve you without income documentation. 2. Credit Score
A great credit score shows your lender that you have a history of repaying debts, and thereby pose less of a risk of defaulting or failing to make payments on time. Getting your credit score as high as possible greatly improves your chances of approval. If your current score isn't great, you can improve it by paying down debts, looking into credit repair services, pay your bills on time, and get a credit report from a reputable company to look for any problem areas. It may seem counterintuitive to pay down debts while also saving for a down payment - and they may have to be done separately - but it's definitely worth it, especially if you need a no doc mortgage. 3. Debt-to-Income Ratio
Lenders will also be looking at your DTI (debt-t0-income ratio). This is essentially the percentage of your monthly income that goes toward outstanding debts like medical bills, car payments, credit card debt, and so on. Not all lenders calculate this ratio the same way, and some will include costs like health insurance, utilities, and so on. The point is to have the lowest possible percentage, typically a target of 43% or below - but that can vary by lender. Generally speaking, though, a lower DTI means that you have more money available each month, and shows your lender that you'll be able to afford your mortgage payments. Again, no income verification mortgages are not necessarily easy to come by, but they are available for those who have made the appropriate preparations and have a solid financial foundation. Be diligent in your search for the right lender, and even though you may want to make progress on buying a home right now, it's well worth it to delay the process while you improve credit, pay down debts, and save for a down payment. For most no doc loans, it's absolutely essential. It may take some extra time, but when you're ready to buy a home, you'll be glad you took the extra steps.