In 2019, we are seeing a growing number of mortgage applicants who are asking about how they can qualify for a mortgage without providing tax returns. There are mortgage programs that can accommodate this request so these applicants can purchase their dream home.
There are individuals who are looking for a no tax return mortgage because they have not filed their tax returns in the past 1-2 years. Most of these applicants are W2 wage earners but for various reasons have yet to file their tax returns.
Most of the applicants however are self-employed and although they do have recent tax returns, they cannot qualify for a mortgage with those tax returns. Self-employed borrowers are taking all of the legal tax deductions and as a result, they will show a very low net income or even a loss on their tax returns. It is for this reason why a mortgage program is needed where the borrower does not have to provide tax returns.
When applying for this type of mortgage, most home buyers will initially inquire about no documentation type of mortgage loans. They remember the days when anyone could apply for a mortgage without providing any kind of income or asset documentation. Those loans for primary residences no longer exist.
Today, bank statement only type of mortgages are what the majority of self-employed borrowers will likely need. This is what is needed to qualify for a bank statement loan:
How the program works – The borrower will provide 12-24 months bank statements to the lender. The lender will use the average monthly deposits into those accounts as a basis for qualification. The lender will not look at the checks you are writing or be concerned with the balance.
One of the first questions from borrowers will be about the rates. Usually, they will have the assumption that this type of loan will have a rate as low as the best conventional rate, or will be very high similar to what you would get from a hard money lender. Depending upon their credit score, the interest rate will only be about 1%-1.5% higher than the conventional Fannie Mae approved mortgage.
Qualifying for a refinance without tax returns will be the same as the purchase. The documentation and process for applying and qualifying will be the same. You can even apply for a cash out refinance with a bank statement loan. However, the maximum LTV for cashing out may be a bit lower than a conventional mortgage. Each lender will have different cash out limits.
There are a few niche lenders who offer a program where you qualify using just one year’s tax return and it must be the most recent year.
If you are self-employed and unable to provide tax returns, there is help for you. All you need is 12-24 months bank statements and a two year history of operating your business.