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Can You Still Get a No-Doc Mortgage in 2022?

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You may still be able to get a no-doc mortgage if you have tricky self-employment income or don’t meet the income requirements of traditional loan programs. A no-doc mortgage (also called a no-income-verification mortgage or stated-income loan by lenders) requires less paperwork to get approved and may close faster than a fully documented loan, especially if you have complicated tax returns.

Today’s no-income-verification mortgages come with extra consumer protections, making them a viable alternative to traditional home loans.

What is a no-income-verification mortgage?

A no-income-verification mortgage is a home loan that doesn’t require standard income documentation (including pay stubs, W2s or tax returns) for approval. The lender allows you to use other items, such as bank statements, to show that you can repay a mortgage.

No-doc mortgages were more commonly known as stated-income loans before the housing crash of 2007 and 2008. These loans were popular for self-employed borrowers, as they could essentially “state” whatever income was needed to qualify.

How no-doc mortgages work and who they work for

No-document mortgage lenders offer a variety of different types of no-doc or low-doc mortgages, depending on your particular needs. Below are the most common programs and who might benefit from them.

BANK STATEMENT MORTGAGE

Lenders calculate income based on an average of deposits made into your personal or business accounts over a 12- to 24-month period.

Who they’re best for: If you receive deposits on a regular basis that can be easily documented through your bank statements, this may be a good option.

ASSET-BASED MORTGAGES

Also called an asset-depletion loan, lenders qualify you based on up to 100% of your liquid assets divided by your loan term. For example, someone with a $1 million net worth applying for a 20-year fixed, asset-depletion loan would have $50,000 per year of qualifying income.

Who they’re best for: Wealthy borrowers with a high net worth may benefit from this type of low-doc mortgage loan. Institutional banks may offer them to customers with large balances on deposit.

NO-INCOME, NO-ASSET LOANS

Available only for investment properties, current no-income, no-asset (NINA) loans are approved based on projected rental income for the property being purchased. Typically, as long as the rent covers the new mortgage payment, no income or asset documentation is necessary.

Who they’re best for: Real estate investors with enough cash for high down payments may be able to quickly build a portfolio of investment properties with this type of loan.

No-doc mortgages vs. other types of mortgages

Before you apply for a no-doc mortgage, check the minimum mortgage requirements for the most common standard mortgages. Many borrowers choose conventional loans or government loans backed by the Federal Housing Administration (FHA) because of the low down payment requirements. Conventional loans follow guidelines set by Fannie Mae and Freddie Mac. FHA loans have the most lenient credit requirements. The table below shows the differences between no-doc, FHA and conventional loans.

Minimum requirements for no-doc mortgages vs. FHA and conventional loans

Loan featuresNo-doc mortgagesFHA loansConventional loans
Down payment20%3.5%3%
Credit score700580620
Income documents required?NoYesYes
Interest ratesTypically higher than conventionalTypically lower than no-doc mortgagesTypically lower than no-doc mortgages

Stated-income loans, NINJA loans and other types of no-doc mortgages

Variations of these types of loans include:

  • Stated-income loans. Stated-income mortgages don’t use a W-2, 1099, bank statement or other source to verify the applicant’s income.
  • SISA. Stated-income, stated-asset loans are made without verification of a borrower’s income or assets.
  • SIVA. Stated-income, verified-assets loans are those for which lenders accept your assets as the basis for approval. They’re often called “bank statement loans.”
  • NIVA. No-income, verified-assets loans are similar to SIVA loans, except income is not added to the application.
  • NINA. No-income, no-asset loans have made a comeback, but they’re only available for real estate investors buying rental properties. This type of no-doc mortgage requires enough rental income to cover the new mortgage payment.
  • NINJA loans. No-income, no-job, no-asset mortgages don’t require lenders to verify income, assets or employment. Essentially, with a NINJA loan, the lender takes the borrower’s word that the loan application is accurate.

Pros and cons of a no-doc mortgage

ProsCons
You won’t need income documentation.You’ll need a higher down payment.
You may qualify with just your assets.You’ll pay a higher interest rate.
You may be approved even if your income recently dropped.You’ll need better credit than other loan programs require

When should you get a no-income-verification mortgage?

You should consider a no-income verification loan if you can’t easily verify your monthly earnings, have complex tax returns or just don’t want the hassle of providing a ton of earnings documentation.

Lenders analyze self-employed income differently from salaried or hourly earnings. Because income isn’t guaranteed, lenders take extra care to verify a borrower’s earnings history, the stability of their income, how financially sound their business is and even the demand for the type of service or product that their company offers.

You may want to consider a no-income-verification loan in the following scenarios:

  • You had business expense write-offs last year. Writing off large expenses like equipment or commercial property purchases may push your net income down. Lenders evaluate a two-year history when averaging self-employed income, and a low year of earnings could hurt your approval chances.
  • Your income declined recently. Alarm bells go off with traditional lenders if your income drops, especially if you’re self-employed. In that case, no-doc home loan programs allow you to get a mortgage without tax returns.
  • You file multiple tax returns. The more streams of income you earn, the more complicated your tax returns are likely to be. As a result, a no-tax return mortgage might be a viable alternative.
  • You have an irregular income. Freelance workers and seasonal contractors may get lump sums of money a few times a year. A no-documentation mortgage lender may be able to help if a traditional lender can’t figure out your income.
  • You’re a real estate investor. Ability to repay rules apply only to mortgages for primary residences and second homes. Investors might qualify for a no-doc home loan program on the basis of projected rent for the property they’re buying without any other asset or income documentation.
  • You have a high net worth, but no job. If you’re at a point where working is no longer necessary because you’ve reached a high net worth, a no-doc mortgage loan may allow you to convert your assets into qualifying income.

How do I get a no-doc mortgage?

The term “no-doc mortgage” doesn’t mean lenders make loans to just anyone. In fact, no-documentation mortgage lenders offering the loans must make a good faith effort to show you can repay the loan. That means they’ll ask for other proof you can afford the payments.

Below are four common requirements for no-income-verification mortgages.

  1. Have good credit. No-income-verification mortgage programs generally require a higher credit score than a regular loan with income documents.
  2. Make a large down payment. The down payment minimum on no-doc mortgage loans usually starts at 20%.
  3. Expect higher interest rates. Lenders may charge higher rates than you’d pay for a regular mortgage to cover the higher risk of forgoing documentation.
  4. Prove you can repay the loan. Whether it’s bank statement deposits, rents on an investment property you’re buying or a large stockpile of assets, lenders need proof you have the resources to make monthly payments on your loan.

Are you eligible for a government-backed, no-doc refinance?

No-income-verification mortgage programs are available to qualified borrowers to refinance government-backed mortgages. Homeowners who have paid on time over the past year and have a loan backed by the FHA, U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA), may be eligible for one of these reduced-document refinance loans. An added bonus of these programs: You won’t need a home appraisal.

  • FHA streamline. Homeowners with an FHA loan can reduce their interest rate or get better terms without any income documents through the FHA streamline refinance program. One drawback, however, is that closing costs can’t be rolled into the loan amount unless you agree to a higher interest rate.
  • VA IRRRL. Military borrowers can get a lower mortgage rate with the VA’s interest rate reduction refinance loan (IRRRL) without providing earnings paperwork. The loan amount can be increased to cover closing costs.
  • USDA streamlined assist-refinance loan. If you bought your rural home with a no-down payment USDA loan, you can reduce your rate with the USDA streamlined-assist refinance option. No income docs are needed, and you can add the closing costs to your loan amount.

Are no-doc loans safe?

Modern day no-documentation loans are safer than their stated-income predecessors, as no-documentation mortgage lenders must follow federal laws to verify you can repay the loan with proof of cash flow or assets. Still, every mortgage comes with the risk that you could lose your home if you can’t afford the payments.

Stated-income loans were meant to help people with varying self-employment income buy a house. However, lenders took advantage of the easy qualification process to speed up approvals and close more loans.

When the housing market crashed and the U.S. entered the Great Recession, many homeowners lost jobs or became underwater on their mortgages. Many defaulted on their loans and lost their homes to foreclosure.

THINGS TO KNOW
To protect consumers from future loan abuses, the Consumer Financial Protection Bureau enforces ability-to-repay laws to make qualified mortgages. Qualified mortgages must meet minimum debt-to-income (DTI) ratio requirements with regular income documentation. This ensures that you have enough monthly income to pay all of your debts, plus your new mortgage payment.

 

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