No-income home equity loans are a saviour for the unemployed in Canada. The no-income class, self-employed, or people who earn seasonal commissions are eligible for such loans. In this type of loan, the application is evaluated based on the applicant’s home value.
When applying for no-income verification mortgages or the stated-income mortgages, the lenders generally don’t ask for tax returns. Instead, they consider the borrower’s home equity, cash flow, and available assets. Visit this link for more information.
Table of Contents
How a No-Income-Verification Mortgage Works And Who Should Apply For It?
A no-income-verification loan is an ideal option if you don’t have the required monthly income verification documents or don’t want to get into the hassle of arranging the income documentation.
Self-employed income is different from hourly or salaried earnings as there is no income guarantee. As a result, lending companies are extra careful when verifying the earning source of borrowers to ensure their income stability and payment capability.
Individuals can apply for a No-income-verification loan in the following scenarios –
Write-Off Large Business Expenses
Writing off heavy expenses like purchasing commercial property or equipment may reduce the business’s net income. Generally, lenders check the income history of the past two years to calculate the self-employed income of the applicant. Low yearly earnings mean low chances of loan approval. It is where no-income verification comes to the rescue.
Recent Decline In Income
Your income may drop at any time due to any enforceable or unfortunate circumstances. It generally happens with self-employed individuals or the ones with seasonal earnings sources. You can resort to stated-income mortgages in this situation. A no-document home equity loan is a perfect option in similar cases as funds are arranged easily and instantly.
Complex Tax Returns
Individuals with multiple income streams have complex tax returns. Resultantly, a no-tax return home equity loan might be a better alternative.
Irregular Income Sources
Seasonal contractors and freelance workers may either earn less or a handful of money (not predominantly, though). A lender with a no-income verification mortgage could prove to be of great help.
No Job But High Net Worth
Leveraging the benefit of high net worth, you can apply for stated-income mortgages if you run out of income sources or don’t have any job.
Top Reasons to Apply For Mortgage with No Income Verification
Here are some reasons for applying for a no-income home equity loan:
Protect Your Investments and Savings
People with zero or limited income are forced to shell out their investments and savings to meet general expenses. Financial crunch may even force them to sell their home to arrange some money.
As a result, you may fail to grow your wealth or leverage the benefit of compounding. With a no-doc home equity loan, you can protect your investments. Plus, you’ll enjoy higher equity when your home value rises in the future.
No-Income Group People Can Get a Large Amount of Loan
Getting a loan isn’t easy, and things become more challenging for people who don’t have any income. The chances of loan approval applications are relatively less unless they apply for a no-income verification mortgage.
If you too belong to this category and need a loan of hundreds to thousands of dollars, then you can apply for a no-income home equity loan. Depending on your home’s equity value, you could get a loan of $10,000 to $300,000.
/home_loans_istock519111203-5bfc331ec9e77c002631cac7.jpg)
Enjoy Mortgage at a Low-Interest Rate
Unsecured loans for people with zero income come at a hefty interest rate since it involves high risk. In no-income home equity loans, the borrower’s home is taken as collateral. Since this loan is secured, the interest rate is comparatively lower.
Flexibility
No-income home equity lenders usually adjust the payment terms for the ease of the borrowers. For example, they may defer payments during hard times or allow the borrowers to make interest-only payments.
How to Apply For a No-Income Mortgage?
A no-documentation mortgage doesn’t mean a loan is granted to just anyone. The lenders give the loan in a “good faith effort” but ask for certain proof to ensure that the borrower can repay the loan amount. Here are some requirements for no-income home loan equity
Good Credit Score
Stated-income mortgage application approval requires a higher credit score (of 620+) than regular loans where income documents are needed.
Large Down Payment
The minimum down payment for a no-doc mortgage is 20%, which is comparatively high.
Proof Of Resources To Repay The Loan
Lenders need some proof of the resources to ensure that borrowers can make monthly payments on their loan. It could be a document stating rental income from an investment property, bank statement, stocks, etc.
Lenders offering no-doc home equity loans collect all important information to learn about the borrower and their capability to make payment. The info is gathered through tax returns, pay stubs, or similar documents collected from other sources.
For example, the lenders may ask for their monthly cash flow statements for the past six months instead of tax returns. Alternatively, they may request for appraisals to confirm the equity stake and value of the applicant’s property.
Application and Approval Process
Here is how you can go about applying for a no-income loan:
- Begin by researching the potential lenders offering no-income-verification home equity loans.
- Alternatively, you may find a mortgage broker who can help you find the best portfolio lenders. The broker may also handle the loan process on your behalf.
- Look at the mortgage lending conditions and their options to their current clients.
● Check your financial inventory once you decide to apply for a no-doc home equity loan. Determine the amount that you can afford to repay comfortably every month.
● Next, figure out how much loan you need and apply with the lender(s) accordingly. The application and approval process is quick.
The loan approval takes 24 hours, and the funds are directly deposited into the borrower’s bank account. It’s a hassle-free and smooth process.
Endnote
The qualifying criteria for stated-income mortgages vary from one lender to another based on their risk tolerance level. Though the federal guideline states the preferred rate of interest for financial institutions, there are no strict interest rate rules for the lenders. They are free to set their rates according to the market situation.