Navigating the mortgage process can be a challenge if you’re self-employed, work part-time or have erratic income for other reasons. Lenders recognize that not everyone has a traditional 9-5 job. Here’s everything you need to know about mortgage lenders that do not require tax returns.
5 Best Lenders for No Tax Return Mortgage Loans
It’s best to contact multiple lenders since they have different requirements. Here are the 5 best mortgage companies with no tax return mortgages.
1. Best Overall: Luxury Mortgage
Luxury Mortgage earned Benzinga’s top spot due to its stellar customer reviews. Customers praise its fast, efficient closing process and its excellent communication.
Luxury Mortgage can work with borrowers with credit scores as low as 580. Its bank statement mortgage allows you to qualify with personal or business accounts. Luxury Mortgage can lend up to $6 million to those who qualify for the program. Luxury Mortgage also offers FHA loans and condo loans.
Luxury Mortgage is licensed to lend in Connecticut, Georgia, Illinois, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington.
2. Competitive Rates: New American Funding
New American Funding is a good choice for self-employed borrowers. It allows you to use bank statements to verify your income instead of trying to qualify with tax returns, W-2s or pay stubs, which you might not have with a fluctuating or lump-sum income.
New American Funding is also an excellent lender for first-time home buyers. You can opt for an FHA, USDA or VA loan. New American Funding also has educational resources to help first-timers understand the mortgage process.
New American Funding follows a standard closing process, meaning the time to close will depend on the client and loan type. You can choose to start with a prequalification or preapproval. Prequalification doesn’t involve verifying your income. Preapproval means underwriters have reviewed your income and assets and are reasonably confident you will qualify for a home loan.
3. Best for First Time Home Buyers: Union Home Mortgage
Union Home Mortgage is committed to providing outstanding service, which makes it one of the best companies for first time homebuyers. It has been named a top place to work multiple times.
Union Home’s bank statement mortgage allows credit scores as low as 660 and loans up to $1 million. It also offers conventional mortgages, FHA loans, VA loans and USDA loans.
4. Best for Refinancing: Caliber Home Loans
Caliber Home Loans’ bank statement product allows cash-out refinancing. If you’ve had your home long enough to build up equity, a cash-out refinance can help fund home improvements or consolidate debt.
You do need a credit score of 700 or higher and a debt-to-income ratio of 35% or less. Caliber has several other portfolio products, including options for borrowers with a foreclosure or bankruptcy in their history. It also offers conventional and government-backed mortgages.
5. Best for Options: Greenbox Loans
Greenbox Loans has several non-traditional loan programs. It has 12-month and 24-month bank statement programs. Depending on your credit score, you may be able to make a down payment as low as 10%. It has programs for those with a history of bankruptcy or foreclosures.
It also has programs for investors. Greenbox also has traditional loan options like conventional and FHA loans. You can apply online and it publishes its rates on its website for easy comparison shopping.
Is a No Tax Return Mortgage Right for You?
Lenders may be able to help you determine whether a no tax return mortgage is right for you. If your taxable income is significantly lower than your gross annual income, a bank statement mortgage might help. If your income is seasonal or erratic, it might help. If you don’t deduct a lot of business expenses, you might want to explore all your options. Self-employed borrowers can qualify for traditional mortgages, but it can be more of a challenge. Talk to lenders and be upfront about your needs. If one lender isn’t promising, contact another one.
Be persistent and read your loan offers carefully. Ask questions about anything that isn’t clear. When you’re ready, sign the paperwork and get the keys to your new home.
Why Would a Lender not Require a Tax Return?
Many mortgages are qualified mortgages. This means these mortgages have a limit on points and fees and legal protections for the lenders. Lenders are required to follow the rules set by the Consumer Financial Protection Bureau (CFPB) when they offer borrowers qualified mortgages. One of these rules is that they must verify income, and they use tax returns to do that.
Tax returns may not reflect a self-employed person’s actual income. This is because self-employed borrowers usually deduct business expenses. This lowers their tax burden and makes their income look lower than it is. Lenders recognize that tax returns may not be the best way to measure borrowers’ income. Lenders offer nonqualified mortgages to help address this issue.
Lenders still want to make sure borrowers can repay their mortgages. They use bank statements to verify income instead of tax returns with these types of mortgages. That’s why some lenders call these bank statement mortgage loans.
How is this Mortgage Process Different than a Traditional Home Loan?
The mortgage process for a bank statement mortgage is similar to the process of a traditional home loan. Here’s how the process works and the steps you should take to get prepared to purchase or refinance a home.
- Check your credit. Although it isn’t required, checking your credit is a good first step toward buying a home. This is especially true if you’re getting a bank statement mortgage. Some lenders will require you to have a good credit score to approve you for a bank statement mortgage. You might even need to improve your credit prior to applying, especially if your broker has run some predictors and wants to get you approved faster. Credit scores range from 300 to 850. Lenders consider a score of 700 or higher to be good — though it can vary. Get a free copy of your credit report by visiting AnnualCreditReport.com. Review your report for any errors or accounts that don’t belong to you. Contact the credit bureau involved and let that particular bureau know of any errors or issues you find.
- Gather your financial documents. This is the most significant difference between a traditional mortgage and a bank statement mortgage. For a traditional mortgage, you typically need to provide your 2 most recent bank statements. For a bank statement mortgage, you will need to provide at least 6 months of personal and business bank statements. You may need to provide 12 months of statements or more. Gather any documentation of any other income you receive as well.
- Get preapproved. Contact multiple lenders for a quote. Let the lenders know that you’re interested in a bank statement loan. Review each quote carefully. Look at the interest rate and fees. Choose a lender and let the lender know you’d like to be preapproved. Provide your lender with any documentation it needs to complete the preapproval process. The lender will provide you with a letter stating you’re preapproved.
- Find a home. Look for a home that meets your needs and your budget. Keep in mind that you can get a mortgage for less than your preapproval amount. If a lender preapproves you for $200,000, you can buy a home for $150,000 if that’s a better fit for your budget. Once you find a home that checks all your boxes, put in a bid. If the seller accepts your bid, it’s time to finalize your application.
- Complete an application. Choose a lender to complete your formal application. You do not have to choose the lender who preapproved you. Provide all the documentation the lender requests. The lender may ask for additional information, which is a normal part of the process. Answer the lender’s questions promptly. The lender will let you know whether it has officially approved you for a mortgage. If you’re approved, you’ll sign your paperwork and pay your down payment at a meeting. Lenders and real estate agents refer to this meeting as your closing.
You may need to provide a higher down payment for a bank statement mortgage. You may also have a higher interest rate. Each lender has its own requirements, which is why it’s essential to get multiple quotes.
Lenders that Don’t Require Tax Returns
Not all lenders offer bank statement mortgages. Each lender that does has its own minimum credit score. Here are several lenders that don’t require tax returns.
|Lender||Minimum Credit Score|
|New American Funding|
|Union Home Mortgage||660|
Current Mortgage Interest Rates
Mortgage rates vary based on your credit score, where you buy your home and the type of mortgage you choose. You will find many types of bank statement mortgages when you start your rate shopping. A fixed-rate mortgage has the same interest rate for as long as you have the mortgage. An adjustable-rate mortgage (ARM) has a rate that can change. ARMs usually start with a fixed rate. The rate changes after that. A 5/1 ARM has a fixed interest rate for the first 5 years.
Here are the current mortgage rates for a few common types of mortgages.
|7/1 ARM (adjustable rate)||N/A||N/A|
|5/1 ARM (adjustable rate)||4.949%||4.533%|
Frequently Asked Questions
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
Interest that you’ll pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
Look into loan conditions, fees and title information.
Lenders want to make sure you can repay the loan. They look at your bank statements, pay stubs and your last 2 years of tax returns.
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