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Is it Possible to Be Approved for a Mortgage without a W2?

Is it Possible to Be Approved for a Mortgage without a W2?

Short Anwer:

Yes, the lack of W2 income does not equate a dead end for the mortgage application process. Applying for a home mortgage without W2 income might require more documentation. Whether you're self-employed, a freelancer, or working in the gig economy, homeownership can be within reach.

Longer Answer:

In today's diverse economy, many individuals earn their income through non-traditional means. Whether you're self-employed, a freelancer, or a gig worker, you might find it challenging to secure a mortgage without the traditional W2 forms. While traditional mortgage applications often rely on W2 documentation to verify income, there are alternative methods and documentation that can be used to demonstrate your financial stability and ability to repay the loan.

What are W2’s?

A W2 is a tax form that employers in the United States provide to their employees at the end of each year. It details the employee's annual wages and the amount of taxes withheld from their paycheck.  Typically, if you’ve earned over $600 from an employer, you’ll receive a W-2 form. A W2 is a verification of your income from a specific employer for a certain year.

How do I apply for a home loan without a W2?

Gather Alternative Income Documentation

Lenders need to verify your income to ensure you can repay the loan. Without a W2, you'll need to provide other forms of documentation, such as:

  • 1099 Forms: If you're a freelancer or contractor, 1099 forms can serve as proof of income.
  • Tax Returns: Provide at least two years of personal and business tax returns.
  • Bank Statements: Show consistent deposits that reflect your income.
  • Profit and Loss Statements: If you're self-employed, these statements can demonstrate your business's financial health between filed tax returns

Improve Your Credit Score

A higher credit score can offset the lack of a W2 by showing lenders that you're a reliable borrower. Pay down debts, avoid new credit inquiries, and ensure timely payments to boost your score.

Save Money

The more money you have in savings, the more options you will have. You could put a larger down payment, reducing the amount of mortgage you will need to 

Find a co-signer

Another option is to find someone with a steady stream of income to co-sign on the loan with you. The co-signer will be liable for the mortgage but doesn't need to live in the property for you to qualify for primary residence interest rates.

Are there alternative mortgages for non-W2 employees?

There is a wide range of mortgages that use alternative ways to calculate the ability to repay a mortgage.

  • Bank Statement - a mortgage that uses 12 months of your business' bank statements to determine income for qualification.
  • Asset Dissipation- a mortgage for those with lots of assets. For this mortgage, they use the assets after your down payment and closing costs for the purchase of the house to derive income for qualification. 
  • Debt Service Coverage Ratio (DSCR) - this mortgage is only for those looking to buy a rental property. Under this mortgage, qualification is based upon the proposed housing payment of the subject vs the market rent on that property.

Conclusion

Securing a mortgage without W2s is entirely possible with the right approach and documentation. Whether you opt for bank statement loans, asset-based loans, or any other alternative, it's crucial to understand the requirements and prepare accordingly. By maintaining a good credit score, having a larger down payment, and demonstrating a stable income history, you can increase your chances of getting approved for a mortgage without W2s.

Trying to figure out if you can qualify for a house without W2 income, I am happy to help. Reach out to me at teamjd@mainstreethl.com

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These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact me.

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