Can I Obtain a Mortgage Loan Without Income?

January 4, 1999, Postscript January 28, 2011

"I have a 9.5% fixed-rate mortgage on which I owe about $70k, my house has a value of about $115k, and I have excellent credit. I want to refinance while rates are low but I have problem. I am now self-employed and for the past few years, my income has been derived largely from stock market investments and this income does not show up on my W-2. All the mortgage brokers I have spoken to want to put me into a "no-income-verification loan", but this doesn’t help because I must still state my income, which is too low to qualify, even though they don't verify it…Is there a mortgage for me?"

When you don't declare all your income, you can be (deservedly) punished when you try to borrow.

The mortgage brokers you spoke to should have realized that you need a loan on which income is disclosed but not used in qualifying the borrower. This is usually called a "no-ratio loan" because no check is made to determine whether the ratio of applicant income to housing expense meets conventional standards. This differs from a no-income-verification loan on which income is used to qualify but the amount of income reported by the borrower is not verified.

Your punishment will not be too severe because your credit is good and your loan balance is only about 60% of the property value. These are the major factors that lenders rely on when they agree to ignore the borrower's stated income.

Postscript January 28, 2011: This article reflects a period when qualification requirements were liberalized to meet a wide variety of different situations, and a good broker had to find the lowest-priced requirement that would qualify the borrower. See What Are Mortgage Documentation Requirements? Today, full documentation is the rule for every borrower, just as it had been in the 80s and before.

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