Getting a mortgage is often contingent on providing your last two years of tax returns to verify your income But what if you haven’t filed taxes, are self-employed, or your tax returns don’t accurately reflect your income? The good news is that there are mortgage options available that do not require tax returns
Why Would You Need a No Tax Return Mortgage?
Here are some common scenarios where borrowers may need to get a mortgage without supplying tax returns:
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Self-employed – If you are self-employed, your tax returns likely show very low income due to high deductions. Lenders know this doesn’t reflect your full earnings potential.
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Haven’t filed taxes – You may have unfiled taxes for the past year or two. As long as you have W-2s and paystubs you can still qualify.
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Variable income – If you rely heavily on tips, commissions, bonuses or other income not on your W-2, your tax returns won’t show your full income.
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Recent career change – If you recently switched careers, your old tax returns may not be representative of your current income.
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Recent graduation – You may only have 1 year of tax returns if you just finished school.
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Retired – Retirees often have income from pensions, social security, investments etc that doesn’t show up on tax returns.
No Tax Return Mortgage Options
There are several loan programs available that do not require tax returns, including:
Bank Statement Loans
With a bank statement loan, the lender verifies your income by looking at 12-24 months of bank statements. They total up your average monthly deposits. Personal bank accounts are usually counted at 100% while business accounts may be counted at a lower percentage.
FHA Loans
If you are a W-2 employee, you can qualify for an FHA loan with just your W-2s, paystubs, and bank statements. FHA does not require tax returns as long as you have enough alternative income documentation.
Stated Income Loans
Also known as “no doc” loans, you simply state your income on the application. The lender verifies it by assessing the reasonableness of the amount as it relates to your employment and assets. Stated income loans generally require a higher down payment and rates.
No Ratio Loans
No ratio loans do not look at debt-to-income ratios. Rather, they base their approval on your credit scores and down payment amount. This is an option if you have a lot of deductions lowering your taxable income.
Asset Based Loans
With an asset based loan, the lender will look at your assets like retirement accounts, investment accounts and bank balances to qualify you. This option works well if you have significant assets but low taxable income.
Requirements for No Tax Return Mortgage Loans
While every lender will have their own requirements, here are some typical qualification guidelines:
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Credit Score – Many lenders will look for a minimum credit score around 600-620. Some may go lower to 500 for those with good assets.
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Downpayment – Expect a downpayment between 10-20% in most cases. The stronger your credit and assets, the lower the downpayment.
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Self-Employment – Proof of self-employment may be required such as business licenses, website presence, etc if relying on bank statements.
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Income Thresholds – There are often minimum income thresholds based on your geographic location. Common levels are $35,000-$50,000.
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Assets – The more assets you have in savings, retirement, and investments, the better. Assets can help compensate for lower income or credit challenges.
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Property Types – Most lenders will finance single family homes, condos, 1-4 unit properties, second homes, and investment properties with no tax return mortgages.
Pros and Cons of No Tax Return Loans
Pros
- Get approved based on your actual income, not just tax returns
- Qualify even with unfiled taxes
- May have more flexible guidelines for self-employed
- Requirements focused on credit and assets, not just income
- Expand your mortgage options if tax returns don’t help
Cons
- Higher interest rates and downpayment requirements
- Limited lender options
- Need to document income through other means
- Self-employment must be verified
- Loan amounts may be lower than with full income documentation
While no tax return mortgages give you more options, they come with some limitations. But for certain borrowers, they can be an effective way to buy or refinance when tax returns are an obstacle.
No Tax Return Mortgages – Frequently Asked Questions
Can you get a mortgage without providing tax returns?
Yes, there are mortgage programs that do not require tax return submission. Most are offered by specialized lenders catering to self-employed borrowers or those with scenarios making it difficult to document income.
What documents do you need for a no tax return mortgage?
Typical documents include W-2s, recent paystubs, 12-24 months bank statements, proof of assets, proof of self-employment if applicable, and standard identification and credit reports.
Do mortgage lenders verify tax returns?
Most lenders require submission of full tax returns and will verify their validity by requiring you send IRS Form 4506-T. Form 4506-T gives them permission to pull tax transcripts directly from the IRS to match against your submitted returns.
What mortgage options work without tax returns?
Bank statement loans, FHA loans, stated income loans, no ratio loans, and asset based loans are some programs that offer no tax return options. Each lender will have their own requirements.
How do lenders evaluate income without tax returns?
Lenders will look at bank statements to total up deposits over 12-24 months, assess the reasonableness of stated incomes based on your career, and analyze assets to derive possible income sources.
Can self-employed borrowers qualify without tax returns?
Yes, lenders recognize self-employed borrowers often have tax returns showing minimal income due to high write-offs. Bank statement programs that focus on deposits, assets, and credit are commonly used options.
Are mortgage rates higher without tax returns?
Generally rates will be slightly higher than a conventional full-doc mortgage, in the range of 0.25% – 0.5% on average. The lowest rates will go to those with stronger credit and higher down payments.
Is a higher down payment required without tax returns?
In many cases lenders will ask for a down payment in the 10-20% range, but some programs go as low as 3%. Your specific downpayment amount will depend on your total financial profile.
Do I need to show more assets without tax return income verification?
Yes, lenders often want to see stronger assets like retirement funds, investment accounts, and reserves when less income documentation is provided. More assets can help offset the risks.
The Bottom Line
If you’re self-employed or have unique income situations, a no tax return mortgage can expand your home buying possibilities when you don’t have tax returns to help support your income. These programs shift the emphasis to your assets, credit, and overall financial strength. Just be prepared for higher rates and down payment requirements in exchange for skipping the tax return submission.
No-Tax Return Mortgage Rates
One of the first questions people ask when speaking to a lender is what are the rates. We just explained that not all lenders offer mortgage programs that do not require tax returns. There is risk involved for the lender when the borrower cannot provide all of the standard and customary documentation.
Due to increased risk, the rates for mortgages that do not require tax returns will be slightly higher than what you can expect from a conventional loan. Each lender will likely quote the rate differently but the two main factors will be your credit score and your down payment amount.
Can you get a mortgage without providing tax returns?
There are lenders who have loan programs for individuals who cannot provide tax returns. They are designed for self employed borrowers who have not filed tax returns or show a very low net income.