YES! Your Client Can Buy a Residential Home with a No Income and No Employment Verification Mortgage: Essential Guidelines and FAQs

11/21/2024 | The Mortgage Ivy | Uncategorized

Learn how to secure a mortgage with no income or employment verification. Understand the guidelines, borrower eligibility, and property requirements to get the financing you need.

Introduction

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In the realm of mortgage lending, traditional guidelines often pose challenges for individuals with irregular income or employment situations. However, certain programs cater to such cases, offering opportunities for those with no income or employment verification to obtain financing. This article provides a comprehensive guide to navigating the complexities of such mortgages, outlining eligibility criteria, property requirements, and borrower types.

No Income and No Employment Verification Mortgage Guidelines

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Property Size: Maximum 10 Acres

For borrowers seeking a mortgage without income or employment verification, the property size is limited to a maximum of 10 acres. This restriction ensures that the property remains manageable and reduces risk for lenders.

Funds Sourcing and Seasoning

All funds used for the mortgage must be sourced and seasoned for at least 30 days. This requirement ensures that the funds are legitimate and have been in the borrower’s possession for a reasonable period, minimizing the risk of fraudulent activity.

Declining Market Considerations

In cases where the property is located in a declining market, there’s a 10% reduction to the maximum loan-to-value (LTV) ratio. This adjustment accounts for potential decreases in property value and helps mitigate risk for lenders.

Reserves Requirement

Minimum reserves are required based on the loan-to-value (LTV) ratio and FICO score. Borrowers must demonstrate sufficient financial reserves to cover potential expenses and mitigate the risk of default.

Borrower Eligibility

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Typical Borrower Types:

Cash Businesses/Employees: Individuals employed in cash-based businesses can qualify for these mortgages.
Home Equity Holders: Homeowners with substantial equity may be eligible for financing without traditional income verification.
Retirees: Retired individuals with assets but no regular income may qualify for these mortgages.
Seasonal & Gig Workers: Those with irregular or seasonal income can explore these mortgage options.
Change of Industry or Employment Type: Borrowers transitioning between industries or employment types may still qualify for financing.
Real Estate Investors: Investors seeking to purchase additional properties can consider these mortgage options.
Self-Employed: Self-employed individuals with variable income may find these mortgages suitable for their needs.
Recent Immigrants: New immigrants with limited employment history may still qualify for financing.
Dispensary Owners/Employees: Individuals working in the cannabis industry may be eligible for these mortgages.
Recent Life Events: Borrowers experiencing recent life events such as job loss, health issues, or family changes can explore these options.

Gift Funds: Gift funds cannot be used for reserves, ensuring that borrowers have their own financial resources available.
Seller Concessions: Maximum seller concessions are capped at 6%, maintaining the integrity of the transaction.
Occupancy: Properties must be used as primary residences or second homes, preventing abuse of the program for investment purposes.
Property Types: Eligible property types include single-family residences, townhomes, condominiums, multi-unit properties, modular homes, rural properties, and log homes.

Loan-to-Value (LTV), FICO, and Reserves Requirements

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For Purchase/Rate & Term Refinance:

For Cash-Out Refinance:

70% LTV: FICO 740, Reserves 9 Months
65% LTV: FICO 700, Reserves 9 Months
60% LTV: FICO 660, Reserves 9 Months

Additional Reserves

Each additional financed property owned requires 2 months of additional PITIA (Principal, Interest, Taxes, Insurance, and Association fees) for the subject property, up to 12 months reserves.

Specific Requirements

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Cash-Out Fully Amortized Loan: Borrowers must have the first 4 months of PITIA reserves of their own eligible funds, not including the cash-out proceeds.
Adjustable Rate Mortgages (ARM): Reserves are based on the initial PITIA, not the qualifying payment.
Properties Listed for Sale: Properties listed for sale within the most recent 3 months are ineligible for a cash-out refinance.
Condo Max LTV: Maximum LTV for condos is 75% for Purchase/Rate & Term. Cash Out Refinance Condo Max LTV 70%.
Credit History: Borrowers must have no 30-day late payments in the last 12 months for all mortgages. Foreclosure seasoning is 7 years, while consumer late payments in the most recent 12 months may require additional documentation.Frequently Asked Questions (FAQs)Photo by Rohit Farmer on Unsplash

Can I get a mortgage without income verification if I’m self-employed?Yes, self-employed individuals can qualify for these mortgages based on their assets and creditworthiness.
Are there restrictions on the type of property I can purchase?Eligible properties include single-family homes, townhomes, condos, multi-unit properties, modular homes, rural properties, and log homes.
Do recent immigrants qualify for these mortgages?Yes, recent immigrants with limited employment history may still qualify based on other criteria such as assets and credit score.
Can gift funds be used for reserves?No, gift funds cannot be used for reserves. Borrowers must demonstrate their own financial resources.
What credit score do I need for a cash-out refinance?The required FICO score varies depending on the loan-to-value (LTV) ratio, with higher scores generally required for higher LTVs.

Conclusion

Navigating the landscape of mortgages without income or employment verification requires understanding complex guidelines and eligibility criteria. By adhering to the outlined guidelines and exploring available options, borrowers can secure financing tailored to their unique circumstances. Remember, while these mortgages offer flexibility, careful consideration and financial planning are essential to ensure successful homeownership. Contact a Mortgage Loan Officer for more details today!

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Original Article: https://themortgageivy11.substack.com/p/yes-your-client-can-buy-a-residential?r=2bzxfg