Mortgages Without Income Verification

If you’re self-employed or work in a cash business, applying for a mortgage can be a huge headache.  Maybe even a migraine.  Maybe both if that exists.  Why?  Many lenders need to see documents and tax records that show your monthly or yearly income. 

Maybe this is you.  If it is, I’d like to introduce myself.  I’m Phil, and I write for A Nightmare on Loan Street Blog.  You know, like the Blog you are reading right now?  Now that we have intros out of the way, I’d like to share some information on how you can still get a mortgage without income verification AKA “No Doc Loans”.  

First and foremost, it’s important to appreciate the lender side of things.  They have to take a Wu-Tang Clan approach to these and protect their necks.  Not every lender is willing to take this kind of risk.  So if you’re looking around for this option, stay persistent.  It might take conversations with a few lenders to find one that is willing to do this.  Truss Financial Group is one for instance.  They are still down with Wu-Tang, but they have a common sense approach to lending.

The next thing to consider is that you’ll need to be flexible and ready to show that you’re a qualified borrower.  I’m not talking flowers, chocolates, or a singing telegram either.  Let’s review what actually matters.

A Down Payment

If you are challenged to show your income on paper, you’d best come correct with the down payment.  What exactly does that mean?  At least 20% of the price of the home is going to give you the best chance at success.  The goal is to make the loan amount as small as possible.  If that’s not an option, you might not get the loan, or you might have super high fees or interest rates.  

Credit Score

You basically want to be like a Lannister from Game of Thrones - whether you identify with Jaime, Cersei, or Tyrion - they always pay their debts.  A great credit score shows this.  It gives the lender a little bit of confidence that you aren’t going to default on the loan or miss payments.  Now, if you are a Lannister, you likely don’t need a loan since you’d own Casterly Rock, but I think you catch my drift.

If you don’t have a killer credit score, there are a few ways you can bring it up like: pay down some debts, consider credit repair services, or pay your bills on time.  

You might be thinking “how can I pay down debts if I need a big down payment?”.  This is a fair question.  The answer is that it might be best to take the time to do both.  

Debt to Income Ratio (DTI)

Say what?  If the only acronyms you know are NBA or YMCA, don’t stress about this too much - you won’t need a protractor, but a calculator may help.  Your Debt to Income Ratio is the percentage of your monthly income that goes towards outstanding debts like medical bills, credit card debt, or car payments.  

A simple example is if you bring in $1000 a month, and the amount you owe for outstanding debts each month is $300.  Your DTI is 30% (300/1000 = 30%).

It’s important to know that not all lenders calculate DTI this way.  Some may include things like health insurance and/or utility bills.  Regardless of what’s included, you want to treat the DTI like golf: the lower your score, the better.  A common benchmark is 43% or lower.  A lower Debt to Income Ratio shows the lender that you have money available each month and have the funds pay the mortgage.  

In summary, it’s important to keep on keeping on when looking for a lender that offers a mortgage with no income verification.  Again, Wu-Tang Clan can really guide your saving philosophy here: cash rules everything around me, get the money, dollar dollar bill y’all.  Once you do, then just pay down some debts and save for a down payment.  They don’t include that part in the song, but it’s heavily implied.