How to get the mortgage you want without documenting income

One of the more important changes for home lending in recent years is the ability to get a mortgage on very good terms without documenting your source of income at all. Traditionally, approval for mortgage loans required careful analysis of three vital elements: the property, the applicant's credit, and the applicant's income. If someone needed a mortgage loan, but for whatever reason they could not document a steady income to support the loan payments, no institutional home lender could help. Instead, that person was forced to turn to so-called “hard money” loans from private individuals with comparatively high interest rates and high closing costs.

But today, your options are much more favorable. Computerized credit scoring helps lenders to more accurately forecast whether a loan is a good risk, even without “knowing” how the borrower will make the payments. So the lender can focus on only two of the three traditional elements - the property and the applicant's credit - as still make a good investment. The guidelines become a little more conservative - credit becomes more important and the maximum size of the loan relative to the property's value is somewhat less. Overall, however, the flexibility of no documentation lending can make an enormous difference in the right situation.

Here are some good examples:

• PURCHASE: Sally's parents recently passed away and the family home in Monterey was in probate. The will called for the estate to be divided equally between Sally and her brother who lived back East. Sally loved the family home and wanted to live there herself. Her brother however wanted to sell the home for cash. Sally needed financing to buy her brother's half of the home or she would lose it forever. But Sally was recently divorced and she did not have an adequate history of employment to qualify for a traditional mortgage. Using her good credit, we arranged a no income documentation loan for Sally on very good terms and she successfully took title from the probate court. Actually, the loan was more than enough to pay off her brother and the extra cash provided a cushion for Sally while she prepared to re-enter the workforce.



• REFINANCE: Ryan had recently lost his job as a software executive when his firm was bought out. He was confident about finding a comparable position soon enough, but in the near term, Ryan wanted to refinance his home in Palo Alto to consolidate his debts and get a better handle on his monthly cash flow. Under traditional mortgage guidelines, Ryan would have to find his next job, and soon, before he could complete a refinance. But Ryan did not want to rush the matter just so he could close a home loan - and he didn't need to. Good credit and fairly conservative loan amount relative the value of Ryan's home was all he needed to accomplish the goal.



• PURCHASE: George and Valerie were thrilled to learn that a very special property had come on the market. It wasn't far from their own home in Santa Monica and for years they had wondered about the possibility of moving to this better location. But the sellers needed to close quickly. If George and Valerie didn't act fast they would lose it. A traditional bank officer told them they couldn't qualify to buy the next property without selling their current home first. Even though George and Valerie had substantial liquid assets for a down payment, the bank officer said they would not qualify to carry two mortgages based on their income. We showed George and Valerie why credit and down payment were the keys - not income. Now they own their dream home and they had time to prepare their previous home for a sale at the highest price.