What are no income verification loans and why are they harder to get? With most lenders and home loan programs, income verification is a must. It is nearly impossible to be approved for a home loan if you can’t verify how much money you make every month and prove that it’s enough to pay off your loan. The reasoning for this is fairly obvious, but for potential borrowers who are self-employed, retired, or even those who have a salary that is commission-based, passing an income verification can be difficult even though they have enough money to make payments every month. For those cases, a no income verification mortgage could be a huge help.
No Income Verification Loans and “Liar” Loans
No income verification loans used to be very common. In fact, lenders would hand out mortgages left and right without checking for income. Instead, loans were based off of credit history. However, it turned out that many borrowers didn’t have enough income to cover their payments and so would default on their loans, leaving the banks without options. These loans were also called “liar loans,” and they heavily contributed to the housing crisis.
Because of their poor reputation and high risk, most lenders won’t even think about doing a no income verification home loan. However, these loans aren’t gone entirely. Some lenders have special programs designed to approve these loans for borrowers. And while it’s true that a no income check mortgage poses a lot more risk, if used responsibly, they can also be very beneficial for homeowners who can’t easily verify their income.
Benefits and Requirements of the No Income Mortgage
The few lenders that do offer no income mortgages have other requirements in place to lessen the risk these loans pose. For example, they might require a down payment of at least 30 percent for purchases and somewhere about a 65 percent LTV for refinancing. In return, some borrower benefits include no income verification (no tax returns, W2s, or pay stubs), flexible home type requirements (anything from condos to multi-family units), loan amounts up to $3 million, and no limit on how many properties the borrower owns.
For circumstances where verifying income would be difficult, a no income home loan could be a big help. But there are also other options. Chat with a loan officer before settling on one loan option only because you don’t think you qualify for others. At Low VA Rates, we do our best to help any veteran we can obtain an affordable home loan. For more information or to start the application process, visit our site.