If you are a current homeowner and want to refinance your loan but are unable to provide traditional income documentation, you may find yourself wondering what you can do. Luckily, you have several refinance options at your disposal.
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We cover your various options below.
Do you Have an FHA Loan?
If you currently have an FHA loan, you have a valuable refinance option at your disposal. It’s called the FHA streamline refinance. This program is about as low documentation as it gets. The FHA only requires that you provide documentation proving that you made your last 12 months of mortgage payments on time. In other words, you don’t have any
late payments during the last year.
The FHA doesn’t require you to provide documentation regarding your income, assets, or even the value of your home. They rely on your mortgage payment history in order to qualify you for the loan. The FHA allows lenders to rely on the prior information provided with the original FHA loan to qualify you for the loan.
If you find a lender willing to follow the FHA’s minimum requirements, you can get a loan just by proving that you paid your mortgage on time. Beware, though, that some lenders do require a little more verification just to ensure that you are still a good risk.
Are you a Veteran?
Veterans have the similar good fortune as FHA customers. The VA offers a VA streamline program, which was designed to help veterans refinance into a lower interest rate. The VA relies on the mortgage payment history as well. If you paid your current VA loan on time, the VA has reason to believe you will be able to pay a mortgage with a lower payment on time as well.
The VA streamline loan doesn’t require you to refinance into a lower rate, though. You can also refinance into a shorter term or refinance out of an adjustable rate loan and into a fixed rate loan. If you choose any of these options, you still do not need to provide any documentation.
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The net tangible benefit of the refinance and the timely mortgage payment history is all that the VA requires.
Check Out Your Alternative Documentation Refinance Options
If you don’t have an FHA or VA loan, you still have the option to try an alternative documentation loan. While you won’t find a true ‘no doc’ loan any longer, certain
subprime lenders may provide you with the opportunity to secure a loan with less documentation than a standard loan.
The obstacle the lenders have to work around is the Qualified Mortgage Rules. These rules state that lenders must verify your income beyond a reasonable doubt. In other words, this means your paystubs, W-2s, and/or tax returns. Non-prime lenders, or subprime as you may know them, don’t often follow the QM rules. This is only allowed for lenders that keep the loans on their own books. They cannot sell the loans to the secondary market without following the QM rules.
If you are lucky enough to find an alternative lender, you may be able to verify your income with your bank statements. This eliminates the need to provide paystubs, W-2s and tax returns, which many borrowers prefer if they don’t receive their income in the traditional fashion. This is a common option for the self-employed borrower.
Even when lending restrictions seem tight and all lenders seem to want excessive documentation, you have options. The
streamline refinance options are a great choice for borrowers with an FHA or VA loan. If you don’t have either of those loans, or you don’t have a net tangible benefit to qualify you for the loan, a private lender may be just the answer that you need.
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