No Income Verification Mortgage Options in California

Plenty of people who can comfortably afford a home have trouble proving it the traditional way. Self-employed buyers write off expenses that shrink their taxable income. Contractors get paid on 1099s. Retirees live off savings. A no income verification mortgage is designed for exactly these situations, using other kinds of proof in place of tax returns and pay stubs.

This guide gives a quick overview of each option, who it fits, and where to find the full details. Each option has its own in-depth post, linked below.

Not in the literal sense. Federal rules require every lender to confirm that a buyer can afford the payment. What a no income verification mortgage really does is use different proof, such as bank statements, a profit and loss statement, 1099s, savings, or a rental property’s income, instead of tax returns and W-2s.

The industry calls this alt-doc underwriting, short for alternative documentation. These loans fall under the Non-QM category, meaning they sit outside the standard rules that Fannie Mae, Freddie Mac, and FHA loans follow. Our ultimate guide to Non-QM mortgages explains the category as a whole.

Since 2014, federal rules have required lenders to make a reasonable, good-faith determination that a buyer can repay a home loan. That ability-to-repay requirement is why the old stated-income loans, where a buyer simply wrote down a number, no longer exist for primary homes. Today’s no income mortgage loans still verify income. They just accept different evidence of it.

Worth knowing: loans for investment properties that are made for business purposes fall outside those consumer rules, which is why DSCR loans can qualify based on rent alone.

Most no income verification loan options fall into five groups:

A bank statement loan in California looks at deposits over the past 12 or 24 months to estimate income. Personal statements usually count most deposits, while business statements typically have a portion set aside for business expenses. This is the most common choice for self-employed buyers. Our post on bank statement loans for self-employed homebuyers covers how deposits are counted.

A P&L-only loan uses a profit and loss statement prepared by a CPA, enrolled agent, or tax preparer instead of tax returns. It can be simpler than gathering two years of bank statements, especially for businesses with steady income. Our guide to P&L-only mortgage programs explains the documentation lenders want.

A 1099-only loan qualifies independent contractors based on the 1099 forms they receive rather than their tax returns, which often show much lower income after deductions. Lenders typically subtract a set percentage for business expenses. Our overview of mortgage options for self-employed buyers covers how 1099 income compares with other approaches.

Asset depletion turns savings and investments into monthly income for qualifying purposes. It works well for retirees, founders after a company sale, and anyone with significant savings but little regular income. Our asset depletion mortgage guide walks through the math.

DSCR loans are for investment properties only. Instead of personal income, the lender looks at whether the property’s rent covers its payment. Our posts on DSCR loans for real estate investors and California DSCR loans explain how the ratio works.

Flexibility on documentation comes with some tradeoffs. Rates on these loans usually run higher than on traditional loans, and lenders generally want a larger down payment, often 10% to 20% or more, along with solid credit and some savings left after closing. Many lenders also offer larger loan amounts, which matters in the Bay Area. Our post on Non-QM jumbo loans for high-balance buyers covers those programs, and our guide to buyer closing costs helps with the cash side.

Because every lender sets its own rules, terms can differ a lot from one lender to the next. Our post on how to choose the right Non-QM loan walks through how to compare them.

Are no income verification loans only for self-employed buyers?

No. They’re common for self-employed buyers, but they also fit contractors, retirees, people with large savings, and real estate investors.

Can one of these loans be refinanced later?

Yes. Many people use one to buy and later refinance into a traditional loan once their tax returns reflect their full income.

Is a bank statement loan available in California for a primary home?

Yes. Bank statement, P&L, 1099, and asset depletion loans can all be used for a primary home, a second home, or an investment property, depending on the lender.

We start by listening: how income comes in, what documents are easy to pull together, and what kind of property is in the plan. From there, we narrow down which option fits best and draw on access to a wide range of lenders to find the loan best suited to the purchase. Our Non-QM loan options page is a good place to start.

Sources: Consumer Financial Protection Bureau Ability-to-Repay and Qualified Mortgage rule (Regulation Z, 12 CFR 1026.43), effective January 2014; individual Non-QM lender guidelines, which vary. This article is general information, and program terms change, so details should be confirmed for each loan.

Mike Trejo (NMLS #33128) is the Broker/Owner of Bridgepoint Funding (NMLS #1005764), a residential mortgage brokerage based in Pleasant Hill, California. With more than 20 years of experience in the mortgage industry, Mike has helped thousands of borrowers navigate the home loan process, including many healthcare professionals and travel nurses with non-traditional income profiles.

Mike founded Bridgepoint Funding in 2006 and is consistently ranked among the Top 1% of Mortgage Loan Originators nationwide. Reach out at (925) 478-8630 or visit bpfund.com.