A Guide to No Income Verification Refinancing
There are numerous reasons why a homeowner might seek a refinance without income verification. Perhaps you’ve fallen on hard times and need to refinance your home to pay off debt, your assets are held in a foreign bank, or your income isn’t high enough to qualify for a traditional mortgage refinance. Or maybe you are looking to get a cash out refinance for home improvements, but don’t have the income to support it.
No matter your situation, you have numerous options for making your mortgage more affordable.
In this guide, we’ll explore no income verification refinancing. To shed light on all the avenues for refinancing, we’ll discuss both loan options and non-loan alternatives for homeowners looking to tighten their belts.
Can I Refinance My Home Without Income Verification?
Can you refinance without income verification? The short answer is yes.
No documentation mortgages (also known as no doc mortgages or no doc loans) exist in multiple forms. That said, there are important caveats to consider before applying for one:
- Lenders typically still want to verify your ability to repay a loan before approving your application. In the wake of the 2008 financial crisis, numerous federal laws were created to protect both lenders and borrowers from default.
- Lenders offering loans without income verification are taking a greater risk. Because of this factor, borrowers should expect higher interest rates and shorter repayment terms.
- No doc mortgages are specialty loan products. Since they don’t conform to government-sponsored enterprise (GSE) requirements for lender protection, lenders can’t sell them to Fannie Mae or Freddie Mac (GSEs), increasing the risk for borrowers and lenders.
Types of No Income Verification Loans
If you’re seeking a no income verification refinance, you have three viable options. To help you understand all your financial opportunities, let’s explore each no income verification mortgage loan in more detail.
#1 FHA Streamline Refinance
Streamline refinancing is a Federal Housing Administration (FHA) sponsored option for borrowers currently borrowing via an FHA-approved loan. But, as with any alternative home loan option, there are important implications to consider before applying for streamline refinancing. Consider the following for this type of mortgage refinance:
- The mortgage you’re refinancing must already be FHA-insured.
- You must not be behind on your mortgage payments.
- The refinance must create a net financial benefit to the borrower. This is determined based on interest rates, repayment terms, and loan type.
- Lendees may not borrow more than $500 cash from streamlined-refinanced mortgages.
- Investment properties are generally ineligible unless the borrower is a nonprofit organization.
#2 Stated Income/Verified Assets (SIVA)
A stated income/verified assets loan, or SIVA loan, is another option for no income verification refinancing—but there is an important catch with this option. When borrowers apply for a SIVA mortgage loan, they still must declare their monthly gross income on the application.
However, lenders only verify that income based on:
- Pay stubs
- Bank statements
- Other asset verification, like:
- Investment portfolios
- Home equity
- Tangible asset holdings
It’s also important to note that SIVA loans are high-risk for both the borrower and the lender. This is because:
- SIVA loans are nonconforming mortgages, meaning that borrowers’ terms could unexpectedly change if their mortgage lender defaults or is acquired by another company.
- Lenders don’t perform the same income verification that they would for a conventional loan, decreasing their confidence that borrowers can repay the loan per the terms.
#3 No Income/No Assets (NINA)
No income/no assets loans, or NINA loans, require borrowers to submit a statement that declares their ability to repay the mortgage loan. Since NINA loans are typically only approved in rare and special circumstances, these statements can take a variety of forms.
However, this route is most common for people whose assets are held in a foreign bank, making them ineligible for traditional mortgages.
Additionally, to avoid breaking federal laws prohibiting subprime mortgage lending, lenders must protect their investments by charging high or variable interest rates to borrowers.
#4 Bank Statement Loan
A bank statement loan is a type of non-qualified loan, or a non-QM loan. It is also considered a type of stated income loan, as well. With this type of no income verification loan, mortgage lenders look at your previous one to two years of your bank statements to determine if you are a financial fit and capable to repay this loan, as opposed to typical income documentation like a tax return or W-2. Because non-QM loans are riskier to lenders than conventional loans, mortgage rates are typically higher. A non-QM loan like a bank statement loan can be an attractive choice for the self-employed borrower.
How to Refinance Without Income Verification
Once you’ve decided to pursue a no income verification refinance option, you’ll want to take steps to secure the best possible loan terms. The following process can help:
- Inform your lender that you plan to refinance. If your income or payments are interrupted during the process, updating them ahead of time can prevent severe financial consequences.
- Pursue the lowest-risk option first. For instance, if you have an FHA-insured loan, try to secure a streamlined refinance before resorting to a SIVA or NINA loan.
- Consider consulting with an attorney during negotiations with nonconforming mortgage lenders. Doing so can help to protect you and your financial health.
Alternatives to Refinancing
If the options above aren’t available to you, or you’re seeking an alternative to refinancing, you still have alternatives. Instead of refinancing, you could:
- Sell your home – Selling your home can give you the capital you need to pay off your high-interest debts. However, keep in mind that paying off your debts doesn’t guarantee that you’ll be able to afford a new home.
- Rent your home – Consider converting your home into a rental property to continue making your mortgage payments. But don’t forget that investment properties can require significant upkeep and other financial commitments. Be sure you know how much of your income should go to mortgage, because you don’t want to find out the hard way what happens if you miss a mortgage payment.
- Use a sale-leaseback program – A sale-leaseback is an excellent option for people who need want to convert their home’s equity to cash but don’t want to move out or rent out their current home to someone else.
Sale-Leaseback: A Home Refinancing Alternative
No income verification refinancing is possible, but there are more convenient, simple, and affordable methods for reducing your monthly payments or repaying high-interest debt.
Converting your hard-earned home equity can be easy. With a sale-leaseback program, homeowners can access the cash they’ve already paid towards their mortgage in just a few easy steps:
- Sell your home for a fair market value.
- Receive a lump-sum payment that you can use any way you’d like.
- Continue living in your home while you rent it back.
When you’re ready, some programs will let you buy the home back or you can purchase another property and move out.
You will still need to show some proof of income. However, instead of resorting to predatory lending or risky financial solutions, you’ll have simple, fair access to your hard-earned cash to use how you please.
Investopedia. No Documentation (No Doc) Mortgages. https://www.investopedia.com/terms/n/nodocmortgage.asp
Investopedia. Nonconforming Mortgages. https://www.investopedia.com/terms/n/non_conforming.asp
US Department of Housing and Urban Development. Streamline Your FHA Mortgage. https://www.hud.gov/program_offices/housing/sfh/ins/streamline
The Mortgage Reports. Can You Refinance with No Income Verification in 2022?. https://themortgagereports.com/20984/refinance-options-financial-setback-lose-income