Getting an FHA Loan Without Supplying Tax Returns

Buying a home is an exciting milestone in life. But the process of getting approved for a mortgage can be stressful, especially if you have an unconventional income situation. If you’re self-employed, have variable income, or don’t have traditional tax documents, you may be wondering if you can get an FHA loan without providing tax returns. The good news is, yes you can! With the right lender, it is possible to get approved for an FHA mortgage without submitting your tax returns.

Why Submitting Tax Returns Can Be Challenging

The Federal Housing Administration’s (FHA) standard guidance states that lenders must obtain federal income tax returns for the most recent two years when processing an FHA loan application. This helps establish the borrower’s income and payment history.

For W-2 employees, providing tax returns is usually straightforward. But it gets more complicated for self-employed borrowers or those with irregular income. Here’s why:

• Self-employed filers claim deductions. Business deductions lower the taxable income reported to the IRS. But this doesn’t reflect the borrower’s actual earnings.

• Income may fluctuate. If income changes a lot month-to-month, tax returns don’t show current earning potential.

• Filing status may have changed. If you only recently became self-employed, you may not have multiple years of tax returns available yet.

So for these borrowers, tax returns don’t paint an accurate picture of income or ability to repay the mortgage That’s why some lenders offer alternative options.

FHA Loan Options Without Tax Returns

The good news is that some lenders understand the drawbacks of requiring tax returns. They’ve created FHA loan programs that allow alternative income documentation for borrowers who don’t have traditional tax returns.

These programs are commonly called “Bank Statement Loans” because they use bank statements instead of tax returns to verify income. Here are two main types of no tax return FHA loans

12 Month Bank Statement Programs:

• Require 12 months of personal and/or business bank statements to show income deposits
• Allow credit scores as low as 580
• May require as little as 10% down payment

24 Month Bank Statement Programs:

• Require 24 months of bank statements to establish income
• Typically require minimum credit scores around 620
• May offer more flexible debt-to-income (DTI) ratios

As you can see, 24 Month Programs allow lenders to review a longer income history, so they may offer better rates and terms. But 12 Month Programs can be easier to qualify for.

Within each program, specific requirements can vary lender by lender. So it pays to shop around!

Top Lenders for FHA Loans Without Tax Returns

Many national lenders now offer bank statement FHA loans. Based on factors like customer reviews, variety of programs, rates, and fees, here are some top recommendations to consider

• New American Funding: Offers 12 and 24 month programs with credit scores as low as 620. Fast processing and great online resources.

• Caliber Home Loans: Options for low down payments and cash-out refinancing. 700 minimum credit score.

• Angel Oak Mortgage Solutions: Variety of programs for alternative credit profiles. Competitive rates and closing times.

• CrossCountry Mortgage: Highly rated customer service and efficient closing process. Credit scores as low as 580.

• Greenbox Loans: Allows 10% down payments with credit as low as 580. Online applications.

• Guild Mortgage: 660 minimum credit score required. Up to 12 months of bank statements.

Be sure to get rate quotes from multiple lenders to find the best fit!

Qualifying for an FHA Loan Without Tax Returns

While FHA loans without tax returns are more flexible, you still need to meet certain requirements to get approved. Here are some key qualifications to be aware of:

• Credit Score. Each lender sets their own minimum score, but you’ll likely need at least 580. The higher your score, the better.

• Income. Bank statements must show regular deposits that indicate you can repay the loan.

• Down payment. You may need at least 10% down for a bank statement program. Some require less.

• Debt-to-income ratio. Your total monthly debt payments, divided by gross monthly income. This is capped at 55% for FHA loans.

• Cash reserves. Expect to show 3-6 months of mortgage payments in your accounts.

Meeting these requirements demonstrates you are still a qualified, low-risk borrower who can manage an FHA loan. Be sure to consult with lenders to learn their specific policies.

The Application Process

When you’re ready to move forward, here are the typical steps to complete an FHA loan application without tax returns:

1. Check your credit. Obtain copies of your credit reports so you know where you stand.

2. Gather bank statements. Have at least 12 months of personal and business account statements ready.

3. Compare lender quotes. Contact lenders and compare interest rates and program options.

4. Choose a lender. Select the lender and program that best fits your scenario.

5. Submit your application. Provide all required income documents and complete the full application.

6. Get pre-approved. The lender will review your application and issue a pre-approval letter.

7. Find a home. With pre-approval done, you can confidently start shopping for homes.

8. Make an offer. When you find the perfect place, make an offer contingent on final loan approval.

9. Final approval. The lender will verify all information and approve the loan.

10. Close on your home! Once approved, you’ll sign final paperwork and get the keys!

Stay organized and be responsive throughout the process. This will help ensure a smooth approval experience.

Benefits of an FHA Loan Without Tax Returns

The main benefit of getting an FHA loan without tax returns is simply being able to qualify, when you might not otherwise. For self-employed homebuyers or those without a W-2 job, these programs open the door to homeownership.

Some other advantages include:

• More accurate assessment of your current income
• Ability to qualify even if you recently started self-employment
• Potential for quick and easy closing
• Low down payment requirements
• Available across the U.S.

So if you want to buy a home but don’t have traditional tax returns to provide, an FHA Bank Statement loan could be the ideal solution. Do your research to find the right lender and program for your situation. You can get approved and in your dream home sooner than you may think!