Showing proof of income is an essential part of securing a mortgage to buy a house. For most people, it usually comes down to producing W-2s and pay stubs to show that they are employed and earn a stable salary sufficient to fulfill their monthly payments. However, not everybody is on W-2 and earns a predictable income. If that’s you, you might think it’d be impossible to get a mortgage. While having no W-2 income does not necessarily mean that you can’t get a mortgage, it makes securing financing more challenging.
Maybe you’re self-employed, with unpredictable or irregular payments. Perhaps you no longer work but rely on significant assets for your living expenses. Or maybe, you’re going through a rough patch and do not have an income substantial enough to qualify for most mortgages. Getting approved for a house loan with no revenue is not always easy, but it is not impossible.
No-income mortgages are often called “no-doc mortgages” since they do not require the same extensive documentation as traditional loans. Since they present a higher risk for the lender, the requirements are also different. Here are some of the conditions you can expect for no-income mortgages:
- You will likely need a higher credit score (usually 700 or higher) than required for traditional mortgages since it shows that you have a history of repaying your loans.
- Down payments often start at 20% or more of the purchase price.
- Interest rates are typically higher than traditional mortgages since no-income borrowers are riskier.
- Although you may not need a regular income to qualify for a no-doc mortgage, you will still need to prove that you can repay your loan somehow.
Below are some mortgages you may qualify for even if you do not earn a salary.
Stated Income Mortgages
Stated income mortgages are sometimes referred to as bank statement loans. The mortgage lenders use the average deposits made on the would-be borrower’s bank accounts (personal and business, if applicable) over the past 12 to 24 months to decide whether they may be good candidates for this type of loan. In other words, to qualify for a bank statement loan, you must still receive some form of income – although it may not be verifiable through traditional means, such as a salary.
The monthly income is calculated based on the deposits made throughout the period, so it does not matter if it is irregular or sporadic. You may also be asked to provide a Profit and Loss Statement (P&L) that substantiates the deposits or justifies unusually large deposits or expenses.
SISA loan
SISA stands for Stated Income, Stated Assets. The mortgage lender takes your word for your reported income and assets, which presents a greater risk. Therefore, this type of loan may only be available for certain purchases (such as a second home, for example) or for individuals who can demonstrate a long history of self-employment.
SIVA loan
SIVA stands for Stated Income, Verified Assets. As for SISA loans, the mortgage underwriter takes your word for your reported income. However, they will verify your assets and base their decision primarily on this factor. Since the risk is slightly smaller for the lenders, the terms are usually more favorable than SISA loans. It is an excellent option for borrowers with significant assets, such as real estate properties, stocks, vehicles, or other possessions that show overall net worth and their ability to manage debt.
Who are Stated Income Mortgages for?
Bank statement loans are a good option for self-employed individuals, such as entrepreneurs, freelancers, gig workers, contractors, and so on, who may not qualify for traditional mortgages due to their lack of regular income. These categories typically write off significant amounts of their income for tax purposes. Therefore, they may not qualify for traditional loans since underwriters consider net income and tax returns when evaluating their borrowing capacity. However, they may be eligible for a bank statement loan if they receive regular deposits on their account due to their professional occupation.
Stated income mortgages can also be an interesting program for small business owners who don’t document their personal compensation with pay stubs, W-2 forms, or 1099 forms, especially if they hold most of their assets in a business account.
Finally, W-2 employees who receive a significant part of their income in cash (tips, for example) can also prefer applying for a stated income mortgage rather than a traditional one since their revenues can be challenging to document outside of deposits.
No Income Mortgages
Unlike bank statement loans, you do not need to receive any form of revenue to qualify for no-income mortgages. However, you will still need to show proof of your capacity to repay the loan.
NIVA loan
NIVA (No Income, Verified Assets) loans are also known as asset-based loans or asset-depletion loans. This type of mortgage is available for individuals who have accumulated significant assets and can live on their revenues but report minimal taxable income that could help them qualify for a traditional loan. It is, for example, the case of retirees who draw their living expenses from their retirement accounts.
Instead of relying on income, the underwriter evaluates the assets of the would-be borrower and uses them as collateral. Lenders typically prefer these assets to be liquid rather than illiquid or physical assets. The amount they may qualify for is based on the total value of their assets divided by the life of the loan.
NINA loan
NINA loans stand for No Income, No Assets. This type of loan is relatively rare since it presents the highest risk for the mortgage lender. Along with the so-called NINJA (No Income, No Job or Asset) loans, they are often associated with the 2007-2008 subprime crisis and the housing market’s collapse. Lenders have since tightened their lending standards, so NINA loans are rare these days.
NINA loans are typically issued only in specific circumstances where the collateral can justify this type of loan. It is, for example, the case of investment properties, where the loan amount is calculated based on the projected rental amount.
Can you get a mortgage with no income?
Although qualifying for a mortgage without a regular income can be challenging, it is possible. However, you may expect more stringent demands from lenders than traditional loans. Besides, the lending institution will also expect you to show that you can repay the loan, for example, by using your assets or by making deposits in your bank account. If you are currently unemployed or your income is too low, you may need to find someone to cosign the loan.
