Can You Get a Mortgage Without Tax-Verified Income?
It is normal to expect scrupulous identity and income verification when you try to get a mortgage loan. After all, you have to show something for it to gain a lender’s trust, and even good collateral isn’t always enough. It’s more about long-term reliability and ability to consistently pay out a mortgage.
To demonstrate your payability as a borrower, you can submit pay stubs, a W-2 report, or documented tax returns.
But what if you’re self-employed or you have to write off chunks of your income for some other reason? Or you simply don’t have access to traditional employment documents?
The reassuring news is that you can still qualify for a mortgage without having to submit any tax returns. There’s but one catch — you can’t skip the income verification as is. You’ll just have to approach it differently. Namely, by using non-QM mortgage programs.
The non-Qualified Mortgage loans may qualify your case based on alternative proofs of payability, such as:
- your bank deposits
- your held assets
- your rental income
- or other financial evidence beyond tax returns
Is a non-QM loan approach your best option or, maybe, a conventional mortgage will ultimately cost you less? The only way to figure this out is to understand how such loans work at all.
What Is a No-Income Verification Mortgage?
A no-income verification mortgage is a home loan that you can qualify for without submitting tax returns as your proof of income. The “no-income verification” part, however, can be slightly misleading — lenders still must verify your ability to repay the loan. But they will be using alternative sources and proofs for that.
This alternative reference documentation may include:
- banks statements
- asset balances
- 1099 forms
- rental income
In general, any program that accepts such non-standard verifications — with proofs of income other than your standard tax filings — can be considered a non-QM loan program.
Why the Need for Non-QM Loans?
Your traditional go-to mortgage underwriting is good and all, when it works for a salaried employee. However, the taxable income doesn’t always show the budget capabilities of an individual (not by a stretch). E.g., the actual cash flow of a business owner, freelancer, investor, or an independent contractor can far exceed (or go under) what’s stated on paper.
The above categories of workers can legitimately deduct certain taxable income articles, artificially shrinking their reported earnings. This is where non-QM loans come in to help balance out this situation. In particular, by initiating more individual evaluations for borrowers, which often leads to more accurate underwriting as a whole.
Can You Really Get a Mortgage Without Tax Returns?
It’s important to understand the technicality of this question — to answer it, you can get a mortgage without using tax returns to qualify. Naturally, such cases won’t include FHA, conventional, or specialized mortgages (VA and USDA). Even self-employed borrowers commonly get asked for tax reports. What we need is a non-QM lender.
A non-QM lending process will still oblige you to undergo reviews — of your credit, assets, employment, and ability-to-repay. But the requested documentation will be different.
How to Verify Income Without Tax Returns
You can use several ways to apply for a no-tax-return mortgage, and you will benefit from this alternative route the most if you are:
- A self-employed business owner
- A freelancer or gig worker
- An independent contractor (1099)
- A real estate investor
- A high-net-worth borrower with assets
- A retiree with investor income
- A mortgage-seeker with big tax write-offs
If you fall under any of the above categories (all of which commonly struggle with conventional loans due to opaque tax reports), you can try and verify a mortgage without tax returns through one of the following methods:
Bank Statement Loan
- For a bank statement-based loan, you will need to provide 12-24 months of personal or business banking statements.
- Instead of taxable income, the lender will be analyzing your cash-flow reports and factors (e.g., personal earnings and spending over fixed periods).
- To gain a more accurate estimate of your earnings, the lender will also be applying expense factor adjustment, which helps see actual income (with deductions).
- This is a go-to approach for self-employed borrowers, e.g.:
- freelancers
- entrepreneurs
- consultants
Asset Depletion Loan
- Asset depletion loans (aka asset utilization mortgages) are open to borrowers with high accumulated wealth and/or assets in ownership.
- Instead of paychecks or tax returns, the lender will be calculating your monthly earnings based on eligible assets, like:
- retirement account(s)
- brokerage account(s)
- savings
- other cash reserves
- This type of loan focuses on high-net-worth individuals who may have little taxable income, yet possess major liquid assets to back up the mortgage, e.g.,:
- retirees
- investors
- big business and holding company owners
1099 Income Loan
- This income loan allows you to qualify based on your IRS Form 1099 instead of tax returns.
- Lenders will be evaluating your net profits after deductions, which usually includes one or two years of 1099-class income.
- This is an optimal option for self-employed Form 1099 workers, e.g.:
- independent contractors
- commission-based sales professionals
- insurance agents
- consultants
DSCR Loan
- DSCR loans qualify investment properties for a mortgage, verifying your rental income.
- Instead of tax returns or personal income, lenders will be analyzing how much rental income your owned property makes.
- This is a go-to for property investors that either purchase or refinance real estate.
Documentation You Will Need
| Borrower type | What to apply instead of tax returns |
| Self-employed | 12-24 months bank statements |
| Investor | Lease agreements and rent rolls |
| High-net-worth | Asset statements |
| Contractor | 1099s |
| Business owner | CPA profit & loss and business statements |
Pros and Cons of No-Income Verification Mortgage
Pros
- Easier to qualify if you’re a non-traditional earner
- Legitimate tax deductions don’t shrink your borrowing power
- More individual underwriting
- More financing options for entrepreneurs
- Faster approval in many cases
- More accurate analysis of the cash flow
Cons
- Higher interest rates
- Larger down payment requirements
- Stricter cash reserve requirements
- Lenders can be scarcer to find
- Higher closing costs
- Not ideal if you qualify conventionally
How LBC Mortgage Can Help You
Are you a non-traditional earner who simply can’t show enough tax returns to reflect your actual cash flow? Use the expertise of LBC Mortgage to choose the best-fitting no-QM loan program and boost your chances of no-income verification loan approval.
While our experts assist your loan journey, the LBC Mortgage platform can be used to calculate and balance costs and personalize your experience — try it out!