Self-employed? You can still qualify for a home loan

A no-income-verification loan can help consumers who find it challenging to adhere to conventional proof-of-income demands.

by Bill Strain — 

Income documentation is not always easy for the self-employed, commission-based or retired earner, or for any person without a fixed income or a documentable source of income. A no-income-verification loan can help consumers who find it challenging to adhere to conventional proof-of-income demands.

Many self-employed entrepreneurs and business owners are concerned about their ability to qualify for a loan because they do not have the traditional corporate proof of income in the form of W2 statements or 1099 income.

Stated income loans, or no-income-verification loans, are an option for many self-employed people or commissioned borrowers looking to purchase a primary residence, vacation home or investment property, as well as those seeking commercial or construction loans and refinances. These loans, essentially credit loans, are designed for borrowers with good credit (FICO scores of 680 or higher) who can prove continued employment in the same or a similar business for a minimum of two years.

As their title indicates, stated-income loans do not require any proof or verification of income. While there are no maximum or minimum income requirements, the borrower’s stated income must be consistent with income typically derived from his or her occupation, and they must possess verifying assets consistent with the income they state. Bank statements generally are required, and this type of loan does require the borrower to reveal their debts.

Credit is the most important aspect of these types of loans. Many self-employed people think they can’t qualify for a loan, but if they’ve got a good FICO score, they often can find a good loan to meet their needs.

These loans are not limited to self-employed or commissioned earners, but are applicable to everyone. In fact, many people apply for these loans simply because they are processed more quickly. Borrowers can usually expect to pay a slightly higher interest rate for this type of loan, as opposed to a traditional loan in which they must offer proof of income.

Interest rates generally depend on the size of the down payment (if any), the borrower’s credit history, their liquidity of assets and the type of loan discount. Stated-income loan guidelines and rates vary from lender to lender, so it is a good idea to shop around to increase the chances of getting the best deal.

Bill Strain, a mortgage broker with Eagle Mortgage in Scottsdale, specializes in stated income loans. 480-443-9339.

Reprinted from AzNetNews, Volume 25, Number 3, June/July 2006.