Lets GO! A “No-Income” mortgage loan provides an alternative way for a borrower to get a loan for the purchase or refinance of a home.

The subject of “No-Income” loans is one that is visited frequently by our clients. The biggest challenge for us is to show how and when this might be a way for someone to obtain mortgage financing where they might previously have believed they couldn’t. From the many situations we’ve reviewed over the past months, I felt it would be a good idea to re-visit this subject. Please be sure to save this article if you feel ANY of the situations described may apply to you or someone you know who is buying, selling or refinancing a home.

“No-Income” loans are the most widely misunderstood loans in the mortgage industry. Far too many people still think they cannot get a mortgage because they feel they don’t have enough income to qualify. A “No-Income” mortgage loan provides an alternative way for a borrower to get a loan for the purchase or refinance of a home.

Following are several examples where a no-income loan works beautifully. They are presented “Cafeteria” style so you can see different examples for situations most resembling yours or someone you know. It’s far easier to understand the “No-Income” loan when highlighted in terms that apply directly to your situation.

Self-Employed Borrowers: Contractors (plumbers, electricians, landscaping, painting, lawn mowing etc.), consultants, professionals, house cleaners and others. All are good candidates because they often show a lower income to the IRS to reduce their tax bite. This is one of the perks of owning a business.

One spouse/partner has good credit: We have seen this situation many times. One spouse (or partner) has good credit while the other’s has suffered due to divorce, medical situation, bankruptcy, etc. This leaves the other borrower to qualify on his/her own. When the spouse or partner cannot qualify for a loan due to insufficient income, the no-income loan can save the day and get the job done.

Commission-Income Borrowers: Salespeople, people receiving 1099 income as sub-contractors and independent representatives. After expenses, they typically show less money on their tax returns and qualify for lesser amounts. Most are capable of paying on a higher mortgage amount and can do so with a no-income loan.

Divorced and soon-to-be divorced borrowers: If credit has not suffered too badly, the financial burden of qualifying solo for a loan is more than will be accepted by most conventional lenders. Divorced/divorcing people often choose NOT to buy because they don’t want to add insult (a loan denial) to their existing injury. The no-income loan can help both sides to move forward with their financial lives.

Borrowers who want to maintain privacy: Some people have an aversion to sharing their personal financial information with anybody. For these folks, the no-income loan enables them to maintain this privacy from the prying eyes of the lenders. Income and assets can be left out of the qualifying process.

Borrowers who have Cash: Cash is a four-letter word for most lenders in the mortgage business. For borrowers who have cash in their mattress or safe-deposit box, the no-income (specifically “No-Doc”) loan will enable them to bring their cash into the purchase situation. There may be other issues to address depending upon the amount of cash, and they can be discussed more thoroughly with a mortgage professional.

Large gift: Borrowers who have access to a large gift (of cash toward a purchase) will benefit from a no-income loan. A program where the source of the gift isn’t a concern works well for this situation. It also keeps the donor of the gift from having to be considered as a co-signor on the loan, enabling the borrower to do the transaction on her/his own.

Social Security or Pension Income: We have closed several mortgages where the income from social security and/or a pension doesn’t allow a borrower to qualify for a mortgage. These borrowers have – in some cases – taken on a “cash” job where the income is not reported to the IRS. No-income loans can help these borrowers obtain financing when they may need it most.

Borrowers between jobs: Timing is everything. It’s best to borrow when you have a stable source of income to support the repayment of a loan, but if you are in a situation where you may need to access funds, the no-income loan is the perfect fit. I must stress that you should have the means to make the monthly payments on your loan. To do otherwise is financial suicide.

Rental Property Investors: For situations where a borrower has the required down payment for the purchase of investment property and wants to minimize the paperwork, a no-income loan would be appropriate. This can save the need for tax returns typically required of investors.

As always, your credit level will determine your rate. You may also be surprised to find that you actually CAN qualify for more than you think…especially if you have good credit. The first step is to investigate your options with a mortgage professional who has plenty of experience with this type of loan.

Mark Atkinson is a partner in A&M Consulting Group, a mortgage resource for those buying, selling or refinancing real estate. He can be reached by phone at (860) 350-8400. E-mail at Info@AM-Consult.com.