Traditional mortgages have stringent lending requirements. Lenders verify your income in several ways, including reviewing pay stubs and W-2s. But what happens if you don’t have those documents? Many borrowers are self-employed, retirees, and business owners who don’t get these documents because they’re not employees of a single company. Instead, they might run companies or have a different type of income, which isn’t as easily verified.
In the past, these individuals may have been rejected for home loans because they didn’t fit a lender’s strict requirements. For example, they didn’t have W-2s to share, so lenders could not verify their income. Luckily, freelancers, retirees, and business owners no longer have to fit within a lender’s strict criteria for conventional loans. Instead, they may qualify for no doc mortgage loans.
No doc mortgage loans can help borrowers with various income situations get approved for a loan and achieve their dreams of homeownership. These loans can also be used to refinance existing loans to reduce monthly premiums and overall loan amounts. But what is a no doc mortgage? And is it the right option for you? Keep reading to find out.
As a self-employed individual, you likely know how difficult it can be to get approved for financing. Traditional lenders place strict income documentation requirements on borrowers. For the self-employed, providing pay stubs or W-2s to verify earnings just isn’t possible.
Fortunately, no doc loans offer a viable lending solution. With no doc loans, you can get approved for mortgages, business loans, and other financing products without income documentation.
In this complete guide, we’ll cover everything you need to know about no doc loans as a self-employed borrower.
What Are No Doc Loans?
No doc loans, also called no documentation loans or low doc loans, are financing options that don’t require income or employment verification.
Instead of providing pay stubs, tax returns, or other documents to prove your income, lenders use alternative methods to assess your ability to repay the loan.
No doc loans open up lending opportunities to borrowers who:
- Are self-employed
- Have fluctuating income
- Get paid in cash
- Can’t provide typical income documentation
With these loans, you can qualify for financing based on your credit score and assets rather than income.
Types of No-Doc Loans
There are a few different types of no income verification loans available:
Bank Statement Loans
This route means using your past bank statements to prove your income rather than pay stubs and W-2s. This generally makes sense if you’re self-employed or otherwise aren’t receiving a traditional paycheck.
Lenders assess your average monthly deposits to determine your earnings. Bank statement loans are one of the most common types of no doc loans.
Asset-Based Loans
These loans look at your assets rather than your income to decide on loan amounts and terms. Lenders determine your eligibility based on the assets you currently own.
Asset-based loans work for self-employed individuals who have significant assets but lower reported incomes. You may need to provide documentation of assets you own.
Stated Income Loans
Also called no income check loans, these products rely on you stating your income verbally or in writing. Lenders don’t require you to provide any documentation to back up your reported earnings.
Stated income loans are riskier for lenders, so interest rates tend to be higher. These loans work best for borrowers with high credit scores.
No Doc Business Loans
In addition to the personal loan options above, self-employed individuals can also get no doc small business loans.
With a no doc business loan, you provide minimal documentation to qualify. Many lenders only require you to submit a few months of recent business bank statements.
No doc business loans allow you to secure financing quickly and smoothly for your company.
Benefits of No Income Check Loans
No doc loans provide several advantages:
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Fast process – With less paperwork to collect and review, lenders can approve no doc loans more rapidly. Decisions are often made in hours or days rather than weeks.
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Higher approval odds – Income fluctuations and unverifiable cash earnings can lower eligibility for standard loans. No income verification loans increase your chances.
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More options – If you’ve been denied for traditional financing, no doc loans give you more lending options to explore.
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Flexibility – No doc loans offer more flexibility for borrowers with non-traditional income sources.
Qualifying for No Income Verification Loans
While no doc loans don’t require income proof, you still need to meet some qualifications:
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Good credit – Most lenders want to see credit scores of at least 640 to 680 for no doc loans. The higher your score, the better.
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Sufficient assets – For asset-based loans, you’ll need assets to pledge as collateral. Bank statement loans look at regular deposits to determine if you can afford payments.
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Time in business – If applying for a no doc small business loan, you’ll likely need to have been in business for at least 12-24 months.
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Revenue deposits – Lenders want to see consistent monthly revenue deposits in your personal or business bank account. This helps demonstrate repayment ability.
Drawbacks to Consider
While advantageous in many ways, no income check loans also have some potential drawbacks:
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Higher rates – Because lenders take on more risk with no documentation, interest rates are often higher than standard loans.
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Lower loan amounts – With no income proof, lenders may cap loan amounts lower than you could qualify for with documented income.
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Limited options – Not all lenders offer no doc loans. You’ll have fewer lenders to shop between for the best rates and terms.
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Refinancing difficulties – No doc loans can be harder to refinance later since you’ll still lack income documentation for an improved loan.
Tips for Getting Approved
Follow these tips to boost your chances of no income loan approval:
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Maintain excellent credit by always paying bills on time and keeping balances low
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Open new credit accounts slowly and strategically to avoid lowering your score
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Keep significant assets like real estate, retirement accounts, or investments
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Make sure you have consistent revenue deposits in your bank account month-to-month
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Include all income sources in your loan application, even if they can’t be documented
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Work with specialized no doc lenders that cater to self-employed borrowers
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Be ready to explain income fluctuations and provide business tax returns (if available)
Alternatives to Explore
If you have challenges getting approved for a no income verification loan, some alternatives to consider include:
- Secured loans using collateral
- Credit card financing
- 401(k) or IRA loans
- Payment plans directly through vendors
- Crowdfunding
- Peer-to-peer lending marketplaces
The Bottom Line
As a self-employed borrower, no doc loans make getting approved for the financing you need possible.
With less rigid income documentation demands, these loans offer more flexibility and options. No income verification loans allow you to leverage your assets and strong credit standing to qualify.
Just be sure to compare multiple lenders to find the best possible rates and terms for your situation. With the right no doc loan, you can get approved for mortgages, business loans, and other borrowing needs.
Griffin Funding is dedicated to providing our veterans with unparalleled service and the most favorable terms.
The goal with no doc loans is to ensure borrowers can afford their monthly mortgage premiums and have a stable source of income. At one point, lenders had no doc loans that didn’t require the borrower to provide income documentation. Instead, borrowers provided a declaration that indicated they could repay the loan. For example, with a stated income-stated assets loan (SISA), the borrower discloses their income and assets, and the lender accepts the figures provided without verifying them.
These types of loans are severely restricted and no longer available for owner-occupied properties, due in large part to the 2008 financial crisis. Instead, borrowers can get stated income-verified assets loans (SIVA) where the borrower must verify a prospective borrower’s assets, including everything from bank statements to investment and retirement accounts.
There’s also a no-income-verified assets loan (NIVA), which is similar to the SIVA loan, except the borrower doesn’t have to disclose their income. Instead, the lender verifies just the assets. These types of loans tend to be riskier than traditional loans for the lender because they don’t require income verification. However, they’re often still offered to allow for more flexible requirements for borrowers who can repay their loans.
Types of No Doc Loans
There are several types of no doc loans to choose from, allowing lenders to verify your income and assets in non-traditional ways. A few types of no doc loans Griffin Funding offers include:
- Asset-based loans: Asset-based loans are a type of no doc loan that allows lenders to use your assets as income in the verification process. These loans are best for retirees, business owners, and self-employed individuals because they allow you to qualify for a home loan based on several asset types, including bank accounts, CDs, stocks and other investment accounts, and money market accounts. Essentially, any asset that can easily be converted to cash will count toward your “income” to help lenders determine how much you can afford to borrow.
- Bank statement loans: Bank statement loans are similar to asset-based loans. However, instead of using any and all assets that can easily convert to cash, lenders will review your bank statements. Most lenders require at least one to two years’ worth of bank statements from borrowers to qualify and prove that they have a consistent income.
- DSCR loans: DSCR mortgage loans are designed for investors, allowing them to qualify for a loan based on the gross rental income of the property instead of personal income. Lenders use the debt service coverage ratio (DSCR) to compare cash flow to debt to determine if the property’s generated income is sufficient to cover its debts.
- Interest-only loans: Interest-only loans make home loans more affordable for the first portion of the loan by allowing homeowners to pay just the interest instead of the principal balance. After the initial period, the payments are recalculated to include the principal balance.
Griffin Funding also offers a variety of other types of home loans to help you find the right option for you. If you’re not eligible for a no doc loan, you may still qualify for one of our other offerings, such as a VA loan, USDA loan, or jumbo loan.
NO DOC LOANS FOR THE SELF EMPLOYED
FAQ
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