More than 5 million Americans decided to purchase homes in the US during 2019. Buying a home is a time-consuming process and most home shoppers can agree the most grueling process, aside from finding the right home, is getting loan approval.
In order to be eligible for a home, several factors come into play with the amount of money you make being a top consideration. Lenders depend on income verification to qualify you for a loan.
Still, is there another way to buy a home if you don’t meet traditional income verification requirements? Yes, there is. This article will teach you 5 tips to follow to get a home without the typical income verification.
1. Use Personal or Business Tax Returns
Just because you don’t hold a regular job and work for an employer doesn’t mean you can’t afford a home. There are other ways to get a home using non-traditional income. For example, there are self-employed borrower loans available for those who work on their own.
When you’re your own boss, you have to keep track of your own money. The same goes for when you own a business. The best way to show proof of income when you are self-employed is to show lenders your most recent personal or business tax returns.
This is ideal for those who need to complete a 1099 form rather than a w2. When you are self-employed, you keep all the money you make and are taxed during the time you file your return.
If you own a small business you will need to complete form 1120 form instead. Whether you file a personal or business tax form, you now have proof of the money you make and can show this to lenders as proof.
2. Provide Bank Statements and Balances
When you earn money, chances are you want that money in your bank. No matter what type of job you have, you will likely have an account at a bank to keep it safe. Those who make money from commission, self-employment, stocks, investments, or other forms of non-traditional income keep track of the money they make and spend with banks.
You are able to check your month-to-month balances with banks and many lenders accept this as a form of proving income. Even if you are retired you can still have money coming in via retirement assets and Social security. Bank statements are an excellent way to show that.
3. Show Your Debt-To-Income Ratio
Lenders are all about finding applicants who are most likely to pay a loan back. The more risk you carry, the more interest you are going to have to pay if you do qualify. This is especially the case with non-traditional income verification loans. Without proof of regular, consistent income, lenders consider you a risk.
Many no-document loans have higher default rates compared to standard mortgage loans because borrowers are more likely to have a higher debt-to-income ratio. This doesn’t mean you will only qualify for high-interest loans though. You only need to prove you make more than you owe.
Before getting a home, you should work on reducing the amount of debt you have. You also want to boost your credit score and your overall credit history to improve your chances of getting a non-traditional loan.
It’s important to pay down debt balances and make timely payments. You may also want to consider debt consolidation.
4. Put a Larger Down Payment
Mortgage lenders are more likely to approve you when you put a larger down payment if you want to purchase a home. Doing so will help lower your risk profile and reduce the amount of money you need to borrow from them. This will make you more attractive as an applicant because you will likely ask for less money.
Another good thing about going for a larger down payment is that there is a good chance you can reduce your interest rate. If you believe the rate lenders are offering you is too high, you are merely likely to be able to negotiate a better deal putting more down.
5. Apply for No-Income Verification Mortgages
It’s always best to explore the different types of loans available for mortgages to see what you best qualify for. Most people are surprised to learn there are several types of no document loans available.
When you apply for no-income verification mortgages, lenders will not ask for proof documentation to verify income. These are known as stated income loans or “no-doc” loans. There are four main types of no income loans although all don’t ask for documents.
- NINA: No income verification, no asset verification
- NIVA: No income verification, verified assets
- SISA: stated income, stated assets,
- SIVA: stated income, verified assets
NINA has the least requirements and is ideal for those unable to show documentation of income or assets. Instead, collateral and other non-income forms factors are put into consideration. Those who work for a foreign country may find NINA loans work best for them.
NIVA is ideal for those who have available assets and no income such as a retiree. SISA loans are useful for people (small business owners) who have assets and income, but the source is hard to document.
SIVA loans work for those who have verifiable assets but have income that’s hard to verify such as someone who makes money from gratuities or tips.
It’s Possible To Buy a Home Without Traditional Income Verification
There are a variety of ways a person can make income aside from working a traditional job. More and more lenders today are understanding this and making more opportunities available for those with non-traditional income.
If you want to buy a house and want to qualify for a loan without relying on standard income verification, contact us at 801-590-4499. You can also start a quote with us online. We will help you find the best loans most applicable to you so you can get the approval you are looking for.