Any loan amount that you apply for will have one thing in common: the lender decides the approval of the financing.
Not All Lenders and Private Money Loans Are the Same
A conventional mortgage loan and traditional mortgages will require you to provide proof of income and creditworthiness and may ask for your debt-to-income ratio, income verification, and pay stubs.
You may have to give the lender bank statements and recent tax returns, and even a private lender may require income verification for a loan. However, some lenders require no income verification and do not check the borrower’s income.
No Documentation Loan Options
Some loan officers offer a no-documentation loan, also known as no-doc loans, hard money no-doc loans, or a no income verification loan. This simply means that one or more of the types of documentation normally required for any kind of loan program are not needed by a particular lender, and no proof of income may be required.
This type of lender may also be called a niche lender, or niche loan provider. This is a term for private money lenders who focus on other types of criteria when deciding whether or not to loan money, including your stated income, to determine if you can repay the lender.
Low Credit Score Options From No Doc Hard Money Lenders
Even those with a very low score, such as around 450, may still qualify for a private money loan for investment property or other types of loans, such as no doc investor loans or no doc investment loans.
You can expect to pay higher interest rates with any type of non-conventional loan product.
Who Generally Works With These Lenders?
This type of money loan is attractive to those who are self-employed. These loan programs are offered by hard money lenders nationwide.
Self-employed individuals often have difficulty getting approved for traditional loans. This may be especially true for people with income from an all-cash or mainly cash business.
For this reason, no income verification loans are an attractive option.
Types of Borrowers
This loan program requires no income documentation, only the borrower’s self-stated income. In general, these loans appeal to the following:
1. Borrowers who need money quickly and cannot wait the usual 30 days or more to complete a traditional loan or be approved for traditional financing.
2. Borrowers with a temporary but urgent cash flow problem. No documentation loans for investment property may help borrowers hang on financially until occupancy improves.
3. People with emergencies. No documentation and no credit check loans may be of particular value in this situation.
4. Many borrowers are unable to personally guarantee anything to a private lender offering private loans. Traditional lenders typically may refuse such borrowers for conventional loans because they assign an inordinately high weight to the borrowers’ credit score and usually require proof of income.
5. People not able or willing to provide all necessary information to a traditional lender, such as bank statements, tax returns, business operating reports, and so forth, may find hard money lending to be an especially attractive option.
EXAMPLE LOAN SCENARIOS
More About Stated Income Loan Programs and Private Money Lenders
These are some of the most popular options for certain borrowers, especially those that are self-employed with low cash flow and those needing no doc commercial real estate loans. Conventional or traditional mortgages may be unsuitable for certain real estate investors who may not otherwise qualify due to problems with their debt-to-income ratio or income verification.
Stated income loans are easier to qualify for, but they are usually limited to investment properties only and are not for owner-occupied properties. While income verification and employment history don’t matter, credit scores do.
Credit Score Considerations
A real estate investor applying for a no income verification loan program will typically need to have at least a 650 FICO credit score to qualify. However, stated income loans typically allow the borrower to better conserve available cash resources by allowing them to put less money down upfront.
Loan-to-Value Considerations
A stated income loan often allows up to an 85% LTV (loan-to-value) and does not require PMI (private mortgage insurance). LTV refers to the amount of equity you have in your property. Standard loans typically max out at 70% LTV, meaning you cannot have less than 30% equity to qualify. However, we look at everything on a case-by-case basis.
PMI Considerations
PMI protects the mortgage lenders and investment properties should the borrower default. It doesn’t help the borrower and can be expensive, so eliminating PMI typically benefits the borrower considerably.
MORE EXAMPLE LOAN SCENARIOS
No Doc Loans for Investment Property and Real Estate Investors
Qualification for no-doc commercial loans or no-doc real estate loans for investment properties is based partly on the real estate investors’ investment experience, credit history, and current liquid assets. Sometimes, these loans are considered risky to a private lender compared to traditional ones because they’re not highly regulated.
Rental Loans
Qualification for no-doc rental loans is based mainly on stated income cash flow from rented properties, and these real estate investment loans provide long-term financing at fixed rates. These loans can be used for either the initial purchase or refinancing of a mortgage loan and may close as quickly as five days after the completion of the appraisal.
Not all lenders require previous investor experience or a high cash flow for real estate investment loans, and both long and short-term rentals may qualify.
Fix and Flip Loans
Fix and flip lenders provide loan funding for purchasing, renovating, or restoring a property intended for imminent sale and not occupancy. A private lender may see this type of lending as a higher-risk situation because this property has a lower value.
Traditional lenders may be reluctant to approve borrowers seeking a mortgage loan or bridge loans such as fix and flip, but several lenders offer attractive terms.
Get Prequalified Today
If you need a nontraditional lender or a private money lender with a no income verification requirement, start the pre-approval process today.
The private lenders we recommend approve various types of loans every day, including commercial lending, and conventional mortgages, including loans other lenders may refuse. They look forward to the chance to do the same for you.