No tax return mortgage in Houston TX for self-employed
One of the most important documents that you have to submit with your mortgage application in Houston Texas, or anywhere else for that matter, is tax returns. While submitting tax returns won’t be a big deal for a home loan applicant earning a salary, it is quite challenging for most self-employed professionals.
If you are looking for a no tax return mortgage, you should definitely consider owner financing. You can buy any home you want with this financing method without any tax returns. In fact before reading this guide further, you can browse the Houston home listings below and find your dream home. Fill up the form on the listing page and we will get in touch with you promptly.
Why are tax returns important for obtaining a mortgage in Houston?
When you apply for a mortgage, the lender wants to make sure your current financial situation is strong enough and you will be able to repay your loan as per the terms specified in the promissory note and deed of trust.
The documents such as tax returns and bank statement help lenders verify your income. By looking at your tax returns, they can determine your monthly income and expenses. Your tax returns not only detects whether or not a lender will approve your loan, but also the loan amount. In other words, it is a very important document that helps lenders evaluate your credit worthiness.
Your tax return optimizes your chances of getting a loan if you meet the following two conditions:
- You should make a stable income. If you are a salaried employee, you naturally become an ideal borrower for lenders because you are making a fixed amount of income every month. Your file your tax return based on current income, right? Your return is used as income proof by the lenders.
- Your recurring monthly payments shouldn’t exceed a certain threshold compared to your income. Lenders look at the debt-to-income ratio to determine the amount of loan you should be approved for. You may claim tax deductions on certain monthly payments such as student loan. Your returns help lenders discover the monthly recurring payments that you claimed tax deductions for.
The problem most self-employed professionals face is this: They don’t make a stable income.
When your tax returns show that you are not making a stable income, it raises a red-flag and negatively affects your chances of getting approved for a mortgage.
Lenders typically ask for personal and business tax returns from up to two financial years and W-2s or 1099s from up to two years. On top of that, you may also be asked to submit your profit and loss (P&L) statement.
Your lender will probably obtain your tax returns directly from the IRS after getting you to sign IRS Form 4506-T. If you are looking to buy a home before between January and June, most lenders recommend that you should file your tax return as soon as possible so that the latest tax returns can be obtained from the IRS. It takes the agency up to eight weeks to process your return and update it in their records.
Some lenders may approve your mortgage application based on your personal and business bank statement, profit and loss statement and W-2s (if you are a wage earner), but you have to meet certain conditions. These conditions vary from lender to lender.
For example, there may be minimum credit score requirements, particularly when you are applying for a bank statement home loan. These loans are approved based on non-traditional mortgage underwriting standards. Most of these loans vanished from the market following the 2007-08 financial crisis that caused the housing crash. Some lenders still offer these loans, but as already mentioned you may have to meet certain terms and conditions.
How to get no tax return mortgage in Houston
It must be pretty obvious that getting a mortgage without having to submit tax returns is difficult.
You should consider non-traditional financing options such as owner financing if you are struggling to qualify because your tax returns don’t show a stable monthly income.
We help self-employed professionals learn how to get owner financing with terms similar to a conventional mortgage. These terms include:
- A fixed rate mortgage
- 30-year amortization period
- No balloon payment
- Refinance any time you want
- No pre-payment penalty.
An important thing to consider is that you should go through the owner financing terms carefully. In a recent article, we discussed different types of owner financing programs in Houston and their pros and cons. There are certain differences between owner financing and a conventional mortgage. We explained these differences in this article.
You should know that conventional lenders only take your taxable income into account when evaluating your home loan application. Many self-employed professionals and businessmen try to minimize their tax liability. It harms their prospects of getting approved for a mortgage. Since tax returns may not be necessary in an owner financing arrangement, your taxable income doesn’t play an important role. However since owner financing contracts are customizable, the seller decides whether to ask for income verification or not.
If you are looking for a traditional mortgage, you should file your tax returns on time and also make sure that your taxable income is enough to get you approved. Income stability is another important factor to take into consideration.
If you are struggling to qualify because your tax returns don’t make a good impression on conventional lenders, you can opt for non-conventional financing options such as owner financing.
Set an appointment today to learn how owner financing makes it possible to buy any home you want in Houston.