Mortgage Secrets For The Self-Employed And High-Net-Worth Individuals
Greetings From Jeremiah Phillips,
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Obtaining a mortgage with good terms from a lender can be a headache for the self-employed, the wealthy, public officials, and others requiring financial confidentiality. In addition, bankers and other lenders tend to overestimate the risk of loans to self- employed people–even doctors and lawyers.
Usually they require that you provide a large amount of private financial information, and the issue won’t be just the size of the payment, but the volume of paperwork and your privacy. Suppose you are a well- known businessman, actor or politician and the local newspapers are fixated on your private life. Can you trust the clerks at the usual mortgage operation, especially if it’s based in your own home town?
There are two possibilities of loans to protect your privacy and make the borrowing process much easier: “No Income Verification Mortgage Loan” and the “No Documentation Required Loan.” Within these two loans, there are several hundred different ways of structuring a mortgage loan interest rates and repayment terms.
Possibility #1: The “No Income Verification” Mortgage Loan
The easiest and most popular way for self-employed borrowers to qualify for a mortgage is through the “Stated Income” or “No Income Verification” mortgage loan. Such loans are usually made available through mortgage loan brokers and usually not through traditional banks.
You do not have to prove income to pay back a mortgage loan as long as you have good credit and the down payment or equity is at least 10% of the value of the property. Best of all, the interest rates on these loans might be even lower than traditional full-documentation loans. This is because the borrowers’ character and collateral measurements are usually very high. You simply must be able to claim enough income to qualify for the loan and show enough collateral to complete the transaction and still have some money left over in the bank.
The nice part is you don’t need to provide any pay stubs, 1099’s, W-2’s, personal or business tax returns or financial statements. Granted, there may be a slight increase to the interest rate if you’re not strong enough in the character and collateral departments. But the loan application process is so easy that sometimes even salaried borrowers use no income verification loans.
Possibility #2: The “No Documentation Required” Loan
The next level of reduced-paperwork mortgage loans is the “No-Doc” program or “No Documentation Required” loan programs. It’s great for those needing confidentiality.
You do not need to prove your income or liquid assets as long as your credit history is excellent and there is at least a 10% down-payment or equity position in the property. These loans are most popular among borrowers whom want to disclose as little as possible about their financial situation.
On this type of loan there is also a modest increase in the loans interest rate to offset the lenders increased risk in making a loan without documentation to support it.
Possibility #3: The “Don’t Ask, Don’t Tell” Mortgage Loan
There are other mortgage loan programs available that even mitigate the character requirements. These loans typically require the borrower to have at least a 35% down payment or equity position in a property to qualify for the loan.
Such loans are used almost exclusively by people whom have no documentation or credit to show or simply require the highest level of personal privacy. These loans are very popular in the Washington, DC, area among foreign nationals.
In any case, regardless of what a borrower’s situation is, there is almost always a way of accommodating the need for privacy.
Finding The Right Home Loan Has Never Been Easier!
Tip #1. Do Your Legwork Ahead Of Time - Understand the basics of refinancing and what various terms mean before you apply. You should also know what the prevailing rates are and whether you want to pay points to “buy down” your rate to a lower level. Once you have that information, decide whether you want a fixed-rate loan, an adjustable or some type of modified product (which remains fixed for three to seven years before becoming adjustable). If you decide on a fixed-rate, determine whether you want a 15-, 20-, 25- or 30- year loan. Keep in mind, the shorter the loan, the faster you build equity and the less overall interest you pay.
I will be available at a NJ Open House hosted by Dan Bozza of RE/MAX Central this coming Sunday from 1pm til 3:30 pm. at 2 Crane Way in Toms River New Jersey. Stop by for your free Homebuyers Tool Kit! I’ll be doing on the spot no obligation pre-approvals as well as answering any questions or concerns related to financing. See you there!
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