How to Get a Mortgage Without Tax Returns

For entrepreneurs, freelancers, and those with inconsistent income, tax returns might not accurately reflect their earning capacity or financial situation. Luckily, it’s possible to get a mortgage without tax returns. You’ll need to work with a lender that offers mortgages using bank statements or pay stubs. 

This article will guide you through the process, outlining the options available and showing you how to increase your approval odds. 



Can You Get a Mortgage Without Tax Returns?

Although lenders typically require tax returns to verify a borrower’s income, there are other ways to demonstrate financial stability and credibility. For instance, you can use W-2 statements, salary slips, bank account statements, or, if you are self-employed, a profit-and-loss statement from the last year. 

Some lenders may offer a “no income verification” or “no doc” mortgage. While these loans are easier to get, they also come with higher interest rates and typically require a higher down payment.

What Is a No-Doc Loan?

A no-doc loan is a type of mortgage that doesn’t require the borrower to provide income and employment documentation. This type of loan can help applicants who have difficulty producing proof of income, such as those who receive untaxable income or are self-employed. 

However, it’s important to note that no-doc loans often come with higher interest rates and down payments, so be sure to explore all your options before using a no-doc loan. 

No-Doc Loan Costs

Just like any other loan product, no-doc loans do have costs. These can include:

• Interest rates: Because the lender takes on more risk by not verifying your income, it will typically charge a higher interest rate on a no-doc loan. 
• Down payment: These loans often require larger down payments, usually at least 20% of the home’s price. While a down payment isn’t a sunk cost, it’s still a lot of cash required to close.
• Closing costs: As with any mortgage, no-doc loans also have closing costs. These include fees for things like property appraisal, title search, legal fees, and loan origination fees.
• Prepayment penalty: Some no-doc loans come with a prepayment penalty. This fee is charged if you pay off your loan early. These fees are limited for conventional loans but are charged by some no-doc loan providers.

When to Get a No-Doc Loan

No-doc loans are not suitable for everyone, but there are specific circumstances where this mortgage option can be beneficial. Here are a few situations where a no-doc loan might be a good fit:

• You’re self-employed: If you’re self-employed and your tax returns don’t accurately reflect your current income, a no-doc loan could be beneficial. This is often the case when business expenses significantly reduce taxable income.
• You have non-traditional income sources: You could consider a no-doc loan if you have non-traditional income sources that are difficult to document, such as tips, commissions, or a cash-based income.
• You’re asset-rich: If you have substantial assets but low income, a no-doc loan can showcase your ability to repay the mortgage based on your assets rather than your income.
• To prioritize privacy: Some high-income earners prefer not to disclose their earnings and opt for a no-doc loan for privacy reasons.
• You have complex finances: If your financial situation is complex or difficult to document, a no-doc loan may be a more straightforward option.
• You need to close quickly: If you don’t have the time required to secure a conventional loan, you may be able to close more quickly with a no-doc loan.

Types of Loans You Can Get Without Tax Returns

In the world of home financing, lenders typically use tax returns to verify a borrower’s income. However, in certain circumstances, a borrower may prefer or need to find another source of financing. These are the types of loans you can get without tax returns:

Bank Statement Loans

With bank statement loans, borrowers provide their bank statements instead of tax returns to prove their income. These loans are particularly useful for self-employed individuals or contractors with consistent income who can’t provide traditional documentation.

There are several lenders that specialize in bank statement loans. One that our users have had particular success dealing with previously is New American Funding. New American offers mortgages nationwide and is totally online. Check out New American Funding to see if its self-employed mortgage is right for you.

Hard Money Loans

Hard money loans are typically short-term, asset-based loans from private investors or companies. These loans focus on the property’s value rather than the borrower’s creditworthiness. While hard money loans offer flexibility and fast approval, they typically have higher interest rates and fees. While a hard money loan isn’t normally a good long-term financing option, you can use it to close on a house while waiting for conventional loan approval.

Stated Income, Verified Assets (SIVA) Loans

SIVA loans allow borrowers to simply state their income, which is then verified through their asset holdings. These loans suit individuals with a high net worth, substantial savings, or investments. However, the borrower must have a good credit score, and the loan-to-value (LTV) ratio is typically lower than other types of loans.

No Income, Verified Assets (NIVA) Loans

NIVA loans don’t require borrowers to disclose their income, but they do need to prove they have enough assets to cover the mortgage payments. These loans are often beneficial for retirees with substantial savings but a limited income.

No Income, No Assets (NINA) Loans

Unlike SIVA and NIVA loans, NINA loans don’t require the borrower to disclose their income or assets. Instead, the lender bases their decision on the borrower’s credit score and the value of the financed property. These loans typically have a higher interest rate due to the increased risk for the lender.

How to Get a Mortgage Without Tax Returns

Getting a mortgage without tax returns can be more complicated than the normal underwriting process. Here’s a step-by-step guide to help you navigate this process:

1. Identify the type of mortgage you want: There are several types of mortgages you can apply for without tax returns, including SIVA, NIVA, NINA, bank statement loans, and hard money loans. Each of these options has its own advantages and drawbacks, so make sure you understand which one may be right for you.
2. Gather required documentation: Depending upon the type of loan you choose, you’ll need to gather different documents. This could include bank statements, proof of assets, or documentation of non-traditional income sources. Assemble these documents in advance to streamline the application process.
3. Check your credit score: Your credit score will play a significant role in your application, especially for loans like NINA, where your credit history is one of the few factors lenders consider. Before you apply, check your credit report and take steps to improve it however possible.
4. Find a suitable lender: Not all lenders offer mortgages without tax returns. Look for lenders who specialize in no-doc loans or other alternatives. Research their application process, reputation, interest rates, and loan terms before making a decision.
5. Submit your application: After selecting the right mortgage type and lender, complete a loan application and submit all the required documents.
6. Understand the loan terms: If your application is approved, the lender will present you with a loan agreement. Ensure you fully understand the loan terms, including the interest rate, monthly payments, and any other fees or penalties.

Pros and Cons of No-Doc Loans

As with any other financial product, these loans come with advantages and drawbacks. It’s important to understand the pros and cons before choosing a loan type and applying.

Pros of No-Doc Loans

• Convenience: No-doc loans require less documentation than traditional mortgages, which can simplify the application process. This can be particularly beneficial for borrowers with complex financial situations or non-traditional income sources.
• Privacy: These types of loans allow for higher financial privacy. Borrowers are not required to document their income or assets, which can be an appealing feature for those who prefer to keep this information private.
• Quick approval: The lack of required documentation can often result in a faster approval process than traditional loans. Since the lender does not need to verify income or employment, the underwriting process can be quicker.
• Suitable for non-traditional borrowers: No-doc loans can be a good fit for self-employed individuals, entrepreneurs, or those with irregular income. These borrowers often struggle to provide the necessary documentation required for traditional loans.
• Leverage for high-net-worth individuals: For high-net-worth individuals with significant assets but low-income, no-doc loans can enable them to leverage their assets to secure a loan. This can be particularly beneficial for retirees or investors with substantial holdings but minimal income.

Cons of No-Doc Loans

• Higher interest rates: No-doc loans often come with higher interest rates than traditional mortgage loans. This is due to the higher risk for the lenders, as they have less information about the borrower’s ability to repay the loan.
• Large down payments: These loans typically require a larger down payment – often 20% or higher. Lenders require this as one way to mitigate their risk, as it increases the likelihood that the borrower will be able to repay the loan.
• Risk of overborrowing: With no-doc loans, there is a risk that borrowers may be approved for a loan amount larger than they can realistically afford, leading to potential financial distress down the line.
• Limited availability: Not all lenders offer no-doc loans and those who do often have stringent qualification criteria. This could limit the options available to a borrower looking for this type of loan.
• Potential for fraud: Because no-doc loans require less documentation, they can be more susceptible to fraudulent activity. Borrowers could misrepresent their income or assets, and lenders might not be able to verify this information fully.

Frequently Asked Questions (FAQs)

Are there government-sponsored no-doc loans?

There are no government-sponsored no-doc loans available. Government-backed loans, such as those from the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA), require documentation to verify a borrower’s income, assets, and employment to qualify for a loan.

Are no-doc loans safe?

No-doc loans can be a safe financing option, but they largely depend on the borrower’s financial responsibility and awareness. Since these loans require less documentation and verification, the borrower must accurately assess their ability to repay the loan. Because of the lack of verification, no-doc loans often have a higher risk of default and fraud. 

Can you refinance without tax returns?

It’s possible to refinance without tax returns. Some lenders offer no-tax return mortgages or no-doc loans requiring minimal financial documentation. These loans are primarily based on the equity in the property rather than the borrower’s income or credit history. They are particularly useful for self-employed individuals or those with irregular income who might not have traditional income documentation like tax returns.