To get approved for a traditional mortgage, you need to provide proof of income. This usually involves presenting your mortgage lender with a couple of recent paycheck stubs (or their electronic equivalent) and your most recent W-2 form. In some cases, the lender may even ask your employer for a proof of income letter, especially if you recently changed jobs. However, if you don't have proof of income, there are still other loan options available when you're trying to purchase a primary residence.
You can get a mortgage loan approved without proof of income by providing evidence of your assets. If you have enough assets, the lender may be willing to go ahead with the loan regardless of your income. State-income loans were originally designed to help people with variable incomes, such as the self-employed, buy homes. Unfortunately, lenders took advantage of the simple qualification process to speed up approvals and close more loans. Pay stubs are essential documents for verifying your income when applying for a mortgage. However, whether you need them or not depends on the type of loan you have applied for.
There are several types of loans, including conventional mortgage loans and loans not based on comprehensive management, that can determine what income documentation you must submit. For example, loans that are not fully managed may allow borrowers to apply for a loan without pay stubs since they consider your assets or bank statements as proof of income instead. Lenders often request these documents to make sure that you have several months' worth of reserve mortgage payments in your account in case of emergency. As a homebuyer, it's often easier to go through the mortgage process if you have a W-2 fixed income for your family. Many loans require the buyer to purchase private mortgage insurance (PMI) if they don't pay at least 20% of the purchase price.
However, you must show that you have enough cash flow, savings, or other assets to make consistent mortgage payments over the life of the loan. If it's difficult to verify your income, then a mortgage with no income verification is an option worth considering. While “true” mortgages with no income verification no longer exist, lenders can qualify you based on just about any type of cash flow. Otherwise, the potential buyer would have to apply for a mortgage before making an offer and could lose the opportunity to make an offer on a home. Be aware of risky clauses such as prepayment penalties or lump sum payments that wouldn't be included in a standard mortgage loan. Current undocumented loans are safer than their predecessors with reported income since undocumented mortgage lenders must comply with federal laws to verify that you can repay the loan with proof of cash flow or assets.
The following table shows the monthly principal and interest payment for a 30-year fixed-rate mortgage based on a series of FICO scores for three common loan amounts. Yes, it is possible to buy a home without having a regular job or stable source of income by getting a mortgage with no income verification. In fact, undocumented mortgage lenders must make a good faith effort to show that you can repay the loans they offer. This means that the lender has checked the buyer's credit, verified the assets, and confirmed employment in order to approve a specific loan amount. Lenders request the necessary documentation to ensure that you qualify for a mortgage loan such as work history, tax returns, pay stubs, and other types of proof of income.
