Whether you have recently lost your job or are self-employed with irregular pay, needing additional cash for certain expenditures is common. If you find yourself in a situation like this, you’re likely searching for a personal loan that doesn’t have income verification. In the event that you’re a homeowner, you could gain access to funds by obtaining a home equity loan. However, doing so can be challenging because of the need to prove that you bring in consistent income.
If you’re wondering about the possibility of being approved for a home equity loan without verifying that you have income, the answer is that you may be able to depending on your credit score, the amount of assets you have access to, and several additional factors. The following offers an in-depth look at how to find home equity loans without verifying your income.
How to Get a Home Equity Loan with Low or No Income Verification
The majority of loans work based on the lender offering a lump sum of money in exchange for regular payments that pay off the balance and interest of the loan. Even though lenders reduce their risk by charging interest, there’s nothing that can be done to erase this risk. If the borrower ends up defaulting on their loan, it’s difficult for the lender to recover the money they’ve lost. This is the main reason why lenders want income to be verified.
Home equity loans provide homeowners with the ability to borrow money against the equity that they’ve built up in their homes. You can then use the money from these loans to:
- Consolidate your debt
- Pay for college
- Pay for high medical bills
- Perform renovations
- Take a vacation
- Start a business
- Buy another home or investment property
When you apply for a home equity loan, lenders often require you to provide them with income documentation that shows you can keep up with the monthly payment. The amount of income you need to bring in to qualify for a home equity loan depends on how much money you’re asking for. A higher loan amount will usually require a higher level of income.
However, it’s possible to find home equity loans that don’t require income verification. In fact, there are four types of these loans that don’t check income levels, which include:
- Stated income, verified assets (SIVA)
- Stated income, stated assets (SISA)
- No income, no assets (NINA)
- No income, verified assets NIVA)(
The SIVA loan is meant to be used by individuals who have some verifiable assets but don’t bring in a consistent income. If you work as a bartender or in an occupation that’s based on tips, the SIVA loan might be right for you.
The SISA loan is regularly obtained by self-employed individuals and business owners who have some assets and income that are present in a basic business account. When you apply for this loan, your lender will instead look over the bank statements for your business account to determine what your cash flow is.
NINA is a type of loan that has become increasingly rare since the financial crisis in 2008. If a lender is willing to give you this type of loan, you’ll need to provide a high down payment and have an exceedingly high credit score.
NIVA loans work just like SIVA loans but don’t consider your employment or income. The lender will instead use your assets as collateral. It’s common for retirees to seek this type of loan.
If you’re unable to verify your income and can’t find this type of home equity loan, some of the alternatives at your disposal include a personal loan, a reverse mortgage, and a sale-leaseback agreement.
When you want to submit an application for a home equity loan that doesn’t come with an income check, make sure that you’ve built up around 30% or more of equity in your home. Your combined loan-to-value (CLTV) should also be less than 80%.
This measurement is calculated by adding your loan balance to the amount of money you want to borrow. The number you obtain is then divided by the home’s appraised value. If you have a high equity and a low CLTV, it shouldn’t be too difficult for you to be approved for this loan.
Alternatives to Home Equity Loans
Whether you’re unable to qualify for a home equity loan without income verification or would prefer to use a different solution, there are numerous alternatives to home equity loans that you might be interested in.
Sale-leaseback Agreements as an Alternative to Home Equity Loans
A sale-leaseback agreement is the most common alternative to a home equity loan that doesn’t verify income. If you currently have a high amount of equity built up in your home, this type of agreement gives you the ability to convert your equity into cash without needing to meet the qualifications that come with other loans.
In this scenario, you’ll be selling your home, obtaining the cash, and using your cash to purchase a lease that will rent the home back to you. While this option might seem appealing and does grant you access to cash when you need it, you’ll no longer be a homeowner.
Reverse Mortgages as an Alternative to Home Equity Loans
Reverse mortgages are highly beneficial for retired homeowners who want to build their cash reserves. You’ll no longer be tasked with providing monthly payments, which makes it easier to build up your cash reserves. Keep in mind, however, that taxes and insurance must still be paid. You’ll also need to remain in the home until the loan is paid off. If you want to qualify for this type of loan, you’ll need to be at least 62 years old.
Personal Loans and Lines of Credit as an Alternative to Home Equity Loans
If you’re unwilling to put up your home as a form of collateral, a personal loan could give you the cash you seek. These loans can either be unsecured or secured. You’re also able to use the funds you obtain to make any type of purchase. If you’re approved for this loan, you’ll be given a fixed repayment period and interest rate.
The main benefit of obtaining a personal loan is that the paperwork requirements are minimal. You also don’t need to build up considerable home equity before you apply. Depending on the lender, you may receive your money within 24 hours after you submit an application. However, these loans can have very short repayment terms, which you must be prepared for to avoid defaulting on the loan.
Consider seeking a home equity line of credit (HELOC) if you want to have more flexibility with the amount of funds you borrow. These loans are also secured by the equity you’ve accumulated. Your credit score, home value, and DTI ratio will also be considered by the lender.
The main difference between a home equity loan and a HELOC is that you don’t receive a lump sum payment with a HELOC. Instead, you can borrow small amounts of money from the line of credit whenever you need it. Most of these loans allows you to draw from the line of credit for around 10 years, after which the repayment period will last upwards of 20 years. The main downside to this option is that it usually comes with a variable interest rate, which makes it difficult to predict what your monthly payment will be.
Crowdfunding and Other Creative Financing Options as an Alternative to Home Equity Loans
Although less common than the other alternatives, you can gain access to cash by purchasing investment properties via crowdfunding. If the property performs well, you’ll be able to increase your wealth.
While you can purchase an investment property on your own, real estate crowdfunding gives you the opportunity to pool your money together with other investors to purchase real estate, which means that your buy-in will be considerably smaller. It’s possible to take advantage of this investment option with a few hundred dollars. The money will usually be placed into a real estate investment trust (REIT). You’ll receive income via dividends.
Another creative solution to use instead of home equity loans is a cash-out refinance loan. This option allows you to obtain a relatively low interest rate, which results in reduced monthly payments. When your monthly payments are lower, your assets will be higher.
The main issue with this alternative is that your mortgage term will lengthen. You’ll also be tasked with paying closing fees for a second time, which amounts to around 3-6% of the amount you borrow. In the event that you’re borrowing more than 80% of the home’s value, private mortgage insurance will be necessary.
Can You Purchase a House with No Income Verification?
It’s possible to purchase a house without providing verification for your income. However, lenders still require some proof that you’ll be able to make payments on time. Proof of income can involve W-2 forms, pay stubs, and bank statements for a traditional mortgage. If you don’t have any income, your bank statements will be used to verify that you have enough assets to afford the home.
The main benefits of purchasing a home with no income verification include lower documentation requirements and the ability to qualify by solely providing evidence of assets. On the other hand, you’ll need to provide a high down payment and will likely receive a much higher interest rate that will lead to a sizable monthly payment.
If you don’t want to go through the hassle of qualifying for one of these loans, you could qualify for a traditional loan by keeping extensive financial records, reducing your debt-to-income ratio, and improving your credit score.
Conclusion
Before you apply for a home equity loan without income verification, you should weigh the pros and cons of this solution. While you’ll be granted a high amount of cash, you’ll also pay a high interest rate and large down payment. To avoid these issues, consider alternative solutions, which include everything from a sale-leaseback agreement to a reverse mortgage. Whatever decision you end up making, it should be one that aligns with your current circumstances and financial goals.