Home Loans Without Tax Returns
Mortgages come in many shapes and sizes. For people with nontraditional employment, varying sources of income, or other unique situations, the diversity of home loans available can help them secure financing without standard documentation. Ultimately, it's up to the lender to determine the kinds of mortgage products they offer. That means that each lender is a bit different, and that you'll likely have to shop around to find the best option for your unique and personal situation. Still, many lenders have options in place for those who may not be able to provide standard w2s, and still others for those who need to prove their income without using their tax returns. Many mortgages are "qualified" - meaning that they must conform to the rules set by the Consumer Financial Protection Bureau. These qualified mortgages are more common, and have limits on fees, interest rates, and other legal protections for both lender and borrower. However, the relatively narrow scope of such loans doesn't always cover the needs of would-be borrowers. To help solve this problem, many lenders offer "nonqualified" mortgages that - while still subject to some regulations - are a bit "looser" in their options. This agility allows lenders to use other forms of income verification, and help those without traditional employment secure mortgages! Both qualified and nonqualified mortgages will require the borrower to provide proof of income. For some borrowers, however, nontraditional employment means not having W2s. For people who own their own businesses, write offs and other tax breaks can change the totals reflected on tax returns - and show figures well below what the entrepreneur actually earns. In this situations, some lenders will allow borrowers to use their bank statements - usually 12 to 24 months' worth - to show proof of income and ability to repay a loan. Because these types of loans are nonqualified, however, they may come with additional requirements or steeper fees than a standard qualified mortgage from the same lender. They may require a higher credit score, a larger down payment, come with higher interest rates, and so on. Still, even with these potentially more expensive requirements, these types of loans provide opportunities for those who could not otherwise qualify through more traditional means.
If this sounds like your situation, whether you're looking to purchase a home to live in or an investment property, know that there are mortgage options available to you - even if you don't have traditional documentation or cannot, for one reason or another, use your tax returns as proof of income.
Make sure you do your research, find your available options, and ask plenty of questions. The more you can prepare before actually applying for a loan, the greater your chances of approval will be. This may require saving for a down payment, improving your credit score, or otherwise preparing your finances, but rest assured that nonqualified mortgages are likely to provide the agility you need to be approved for a home loan without providing tax returns.