No-Doc Mortgages For Homebuyers Without Qualified Income

by Gustan Cho

This article is about no-doc mortgages for homebuyers without qualified income:

No-doc mortgages were the most popular home loan program prior to the 2008 financial crisis. Homebuyers who could not document their incomes or had substantial unreimbursed business expenses on their income tax returns opted for no-doc mortgages when buying a home. However, after the 2008 real estate and banking meltdown, no-doc mortgages completely disappeared. For many years, alternative loan programs like no-document loan programs were non-existent. Gustan Cho Associates dba Capital Lending Network, Inc. is now offering no-doc mortgages for primary homes with a 20% down payment. No-document loan programs benefit self-employed borrowers, business owners, or borrowers with irregular incomes.  There are no income tax returns required on no-doc loans. There are no maximum loan limits on non-QM loans. Borrowers who need jumbo loans can qualify with a no-doc jumbo mortgage. In this article, we will discuss and cover the qualification requirements of no-docs home loans for homebuyers.

No-Doc Mortgages Explained

No-doc mortgages, or no-documentation loans, are home loan programs that the lender does not require income tax returns. However, borrowers need to provide bank statements, have at least a 640 credit score, and have at least a 20% down payment. There are different types of no-doc home loan programs.

Comparison Of No-Doc Versus Traditional Mortgages

Traditional loan programs require prior two-year income tax returns, verification of employment, 30 days of paycheck stubs, employment history, and the likelihood of strong employment for the next three years. Providing income and employment documentation shows the lender the strong probability of the borrower with the ability to repay their new mortgage loan. The more income, asset, and employment documentation a lender have, the less risk the borrower under the eyes of the lender. The lower the risk the lender has to take, the lower the rate the lender can offer the borrower.

Docs Required By No-Doc Mortgage Lenders

No-doc mortgage lenders require a high credit score and a larger down payment to offset the no income documentation on no-doc loans. Borrowers who cannot provide documented income realize no-doc mortgage loans require higher down payments and higher rates than traditional loan programs. Many successful business owners have substantial savings, plenty of assets, and great credit and take the tax advantages and loopholes when declaring their adjusted gross income.

Mortgage Process Of No-Doc Mortgages

Borrowers who can benefit from no-documentation loan programs are self-employed borrowers, entrepreneurs with irregular income, business owners with substantial unreimbursed business expenses, and retired homebuyers with substantial savings and assets.  The mortgage process on no-doc mortgages is substantially easier than traditional loan programs. One of the most difficult factors in underwriting traditional government and/or conventional loans is income calculations by mortgage underwriters. There are no income calculations on no-doc mortgages. Therefore, the mortgage process is much easier and smoother. Mortgage underwriters are more concerned about the down payment, reserves, and the borrower’s credit history and credit scores.

No-Doc Home Loans Versus Traditional Mortgage Loan Programs

No-doc loans fall into the non-QM mortgage category. Traditional loans are government and/or conventional loan programs that have specific agency mortgage guidelines. There are specific credit scores, debt to income ratios, credit/income guidelines that borrowers must meet. No-documentation mortgages are portfolio loans. Each lender of non-doc loans sets its own lending requirements. There are no set agency mortgage guidelines. Lenders can make exceptions in a case-by-case scenario. It is up to the individual lender on setting the lending requirements of their loan program.

Underwriting Process Of Non-QM Mortgages

As with other types of home loans, no-doc home loans get assigned a mortgage underwriter. The role of the mortgage underwriter is to make sure the borrower is qualified and has the ability to repay. Since the borrower’s income is not underwritten, the underwriter will specifically look at the collateral. The down payment and credit scores will be the two main factors in determining the qualification of the borrower. Reserves are important and required. The amount of reserves will depend on the borrower’s credit scores and down payment.  Capital Lending Network, Inc. is partnered with dozens of non-QM and special loan program wholesale mortgage lenders. However, the common requirement among all non-QM lenders is they want to make sure borrowers have skin in the game. Skin in the game means in lieu of not requiring income documentation, the lender wants the borrower to put a larger down payment and have reserves. If you had a substantial amount of money tied up on a home, then chances are you will do everything possible not to default on your home loan. Defaulting on your mortgage loan means the lender can foreclose on your loan.

Typical Borrowers Of No-Doc Home Loans

Borrowers of no-doc loans are self-employed, business owners, 1099 wage earners, wealthy retired individuals, borrowers with irregular income, and borrowers who have substantial income tax write-offs. No-doc loans are easier to process and underwrite since extensive financial statements are not required by the mortgage underwriter. The lender will not require income verification, verification of employment, other documents required on traditional loans. The key factors required on no-doc mortgages are the down payment, bank statements, the borrower’s credit report and credit scores, and the property information. Wealthy individuals with multiple businesses who do not want to divulge all of their financials can benefit from no-doc loans.

Types Of No-Doc Loan Programs

CLN Mortgage offers a 12-month bank statement loan program for self-employed borrowers. There are no income tax returns required. Qualified income is determined by the average monthly deposits of the borrower’s bank statement deposits in the past 12 months. Withdrawals do not matter. Borrowers can have a consistent deposit of $10,000 per month and withdrawal $9,999.00 the next day for the past 12 months. Only the bank statement deposit will be used. The income used is the average 12-month bank statement deposit. A 20% down payment is required. There is no maximum loan limit. The interest rate is determined by the borrower’s credit scores and down payment. Bank statement loans are for self-employed borrowers.

Stated Income Mortgage Loans

Stated income mortgages benefit self-employed borrowers who have irregular income such as commissioned wage earners or people paid in cash for their services. Depending on the lender, bank statements may be required. A 20% down payment and reserves are required. The amount of reserves depends on the down payment and credit score. Lenders of stated income mortgages do not require the borrower to be employed. Retired people or those who are self-employed with irregular incomes are ideal candidates for stated income mortgages. Mortgage underwriters are not concerned with the borrower’s debt to income ratio on stated income loans.

Qualifying For No-Doc Mortgages With A Mortgage Company Licensed In Multiple States With Loan Officers Who Are Experts In Traditional Loans Programs And No-Doc Mortgages 

Gustan Cho Associates dba Capital Lending Network, Inc. NMLS 1657322 is a mortgage company licensed in multiple states with no lender overlays on FHA, VA, USDA, and Conventional loans. Capital Lending Network, Inc. has a hybrid business model of being a mortgage banker/correspondent lender and mortgage broker. CLN Mortgage processes, underwrites, and funds government and conventional loans in-house and uses our own funds to close the loan under our name. Capital Lending Network, Inc. has the ability to broker non-QM and alternative specialty mortgage loan programs like no-documentation mortgages, 12-month bank statements loans for self-employed borrowers, non-QM loans one day out of bankruptcy, fix and flip loans, asset-depletion loans, P and L stated income loans and dozens of other owner-occupant, second homes, and investment loan programs.

About Us At Gustan Cho Associates dba Capital Lending Network, Inc.

Unlike other mortgage informational websites, Capital Lending Network, Inc. is a direct lender and mortgage broker and not a lead generation company.  We do not sell your contact information. We have in-house licensed loan officers and support staff. If you have any questions or have to qualify for a mortgage please contact us at Gustan Cho Associates dba Capital Lending Network, Inc. NMLS 1657322 at 262-716-8151 or email us at gcho@gustancho.com. Text us for a faster response. The team at CLN Mortgage is available 7 days a week, evenings, weekends, and holidays.

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