It’s no secret that traditional lenders want you to have consistent income. For them, consistent means they can prove it with your tax returns. If you have income that fluctuates too much over the last couple of years or you don’t report enough income to qualify for a loan, you might not get the financing you need.
No income loans, aka bank statement loans, though, offer the financing you need. If you aren’t sure if your income inconsistencies require a no income loan, here’s what to consider.
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Did your Business Have a Lot of Expenses?
If you have an expensive business year, you might look like you didn’t make much income on paper.
For tax purposes, that’s totally acceptable.
Lenders, however, don’t agree. They can only use your adjusted gross income as you report on your tax returns. If you don’t report high enough income, they can’t use it for qualifying purposes.
If you just started your business or had a year that your business incurred a lot of expenses due to growth, you might be better off with a no income loan, using your bank statements to prove your income versus your tax returns.
Did your Business have an ‘Extraordinary Year’?
Sometimes having ‘too good’ of a year can work against you too. Lenders won’t base your approval on one year of good income. They want to see that it’s reasonable and consistent.
If they look back over the last couple of years and see that this wasn’t ‘normal’ for your business or the industry, they won’t use it. This could leave you without the high income you need to qualify for a traditional loan.
A no income loan, however, will look at the income you bring into your bank accounts regularly, and not what you reported on your tax returns.
Did your Income Fall?
It happens to every business – income rises and falls. On paper, it looks bad and like you can’t qualify for a mortgage. However, sometimes income falls because of other reasons, such as you’re trying to expand and have to put your focus elsewhere for a bit. You might have excessive expenses or other issues that caused your income to fall temporarily.
If you can prove with bank statements that you can afford the loan despite the falling income, you might still qualify using a no income, aka non-QM loan.
Final Thoughts
If you don’t work a salary job, income inconsistencies can make it hard to get approved for a traditional loan. That doesn’t mean you should give up, though.
At Save Financial we work with many lenders who have opportunities for loans using other qualifying factors. As long as you can prove beyond a reasonable doubt that you have the funds to qualify for the loan, you may get approved. Contact us today to learn more about how we can match you with the perfect loan. We know how hard it is to get approved when your income seems like it’s all over the place, but we have the perfect lender for you.
