Can a Non-Qualified Loan Help If You Can’t Show Income?

By Nathan King

Nathan King, a native of Fresno, has spent his entire life immersed in the vibrant Central Valley community. Nathan loves spending time with his family and helping his clients achieve their real estate goals.

Recently, a client came to me with a problem that I’m sure many of you can relate to, and I thought it would be interesting to share. Here’s what happened:

This client was making a lot of money—more than enough to purchase the type of home she was looking for. But there was a catch: She was self-employed and couldn’t verify her income as a result. This is normally a huge issue for conventional mortgages. Without income verification, you often can’t qualify for a typical loan.

Fortunately, there’s a solution that you might not know about: Non-qualified loans. These types of loans are designed to help people just like my previous client. Here’s how they can help those who can’t show income:

1. Flexible income verification. Without a W2 or 1099 form, you probably can’t get a qualified loan. However, non-qualified loans are much more lenient. For example, a good lender can use your monthly cash deposits at your bank and use up to 90% of the amount to stand in for your income. This way, you can still qualify for a significant loan even without easily verifiable income, which is especially helpful if you’ve been self-employed for less than a year.

2. You can keep writing off your business expenses. A lot of self-employed people write off their business expenses, saving them tons of money on taxes. However, this makes it difficult to prove your income. Many people feel like they’re stuck between two bad options: stop writing off their expenses to prove income or qualify for a smaller mortgage. With a non-qualified loan, you don’t need to choose. Since you can verify income with bank deposits, you can continue writing off business expenses and saving money.

3. Non-qualified loans have stricter requirements. While non-qualified loans come with tons of benefits, there are a few caveats you should know. First, you need a higher credit score than for a typical loan. I recommend having at least a 680 FICO score, but 720 or higher is preferred. You also will need to make a larger down payment. While you can put as little as 3.5% down on a conventional loan, you’ll need to put as much as 10%, 20%, or even 25% down for a non-qualified loan. Your interest rate may also be slightly higher; however, if taking a non-qualified loan allows you to keep writing off your business expenses, it’s still a huge financial advantage.

At the end of the day, non-qualified loans offer significant benefits for self-employed individuals. However, a lot of lenders don’t know how to approve you for one. So, if you’re interested in this type of loan, please call or email me. I’d love to connect you with the right professionals and help you buy the home you deserve.