How Freelancing Has Affected the Mortgage Industry

A decade or more ago, companies were employing individuals for the long term. However, that has changed; many individuals globally have started to work on their terms as freelancers.

Freelancers are self-employed individuals—these individuals aren’t committed to a particular employer for the long term, and work with different employers for different periods of time. This also means that they have no permanent source of income.

According to statistics, 9 million individuals in the United States were working as freelancers in 2020, which is a substantial boost since 2014.

Considering these statistics, it’s no secret that freelancers have transformed various industries. However, they’ve affected the mortgage industry as well. Since all mortgages require documents to confirm an applicant’s financial stability, securing a home loan for freelancers can be challenging.

To eliminate this disadvantage while making mortgages available to freelancers, mortgages refinance companies introduced no documentation or no-doc mortgages. To understand what these mortgages are, let’s dive deeper.

What Are No-Doc Mortgages?

No-doc mortgages are loans that don’t require income verification from borrowers. These loans are suitable for freelancers as they don’t have W2 forms or any other proof of income. As a result, when freelancers need financing, they can effectively apply for a no-doc mortgage without showing W2 forms, pay stubs, tax returns, etc.

Moreover, these mortgages are granted on a declaration confirming borrowers can repay the loan. These loans aim to offer financing solutions for those whose income can’t be easily verified. These loans are primarily based on the resale ability of the property and the mortgage repayment structure.

How Do No Documentation (No Doc) Mortgages Work?

As mentioned above, borrowers must submit proof of income to qualify for mortgages. These documents include pay stubs, W2 forms, tax returns, employment letters, etc. Mortgage companies need to gauge if borrowers can afford the loan payments. Therefore, they demand a reliable and stable source of income.

Besides a source of income, lenders also evaluate other factors, such as credit scores, down payments, etc. On the other hand, mortgages such as no documentation loans don’t require such income proofs.

Through no-doc loans, borrowers don’t need to show a lot of documents. Instead, they just offer a declaration, indicating they can repay the mortgage on time. These mortgages are issued to freelancers, individuals who don’t have a  steady source of income, new immigrants, or temporary workers.

In addition, these loans don’t comply with the Consumer Credit Protection Act’s requirement to rationally confirm the borrower’s finances. These mortgages are risky because they don’t demand income verification. Although these loans have become rare since the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010, mortgage companies such as Atlantic Home Capital still offer them.

What Mortgage Options Do Freelancers Have?

Now that you understand how the mortgage industry has initiated loans to accommodate freelancers. Let’s explore the loan options they have.

SISA (Stated Income, Stated Assets)

A SISA loan is a type of no-documentation loan suitable for individuals with a considerable income and assets that are tough to document. When freelancers apply for a SISA loan, they must reveal or state their income and assets in the loan application.

Remember that you just need to mention these figures without providing any documentation. The lender will then assess your loan application and accept the stated figures. These were common before the 2008 financial crisis. However, after the Dodd-Frank Act was passed in 2010, these loans were restricted to owner-occupied properties only.

SIVA (Stated Income, Verified Assets)

SIVA or stated income verified asset loans require borrowers to state their income in the mortgage application. However, the mortgage lender validates the assets and requires 6 to 24 months of bank statements.

This type of no-doc home loan is ideal for freelancers with a good net worth. However, those whose primary source of income is hard cash may also profit from SIVA loans, only if they have a bank account with bank statements.

NIVA (No Income Verification, Verified Assets)

NIVA or no income verification, verified asset loans are appropriate for individuals with confirmable assets but no income verification. In these conditions, lenders confirm the assets without considering the income.

NINA (No Income, No Assets)

NINA loans have the most relaxed requirements among all no-doc loans. These loans are suitable for individuals who can’t offer documents for assets or income. The mortgage lender approves loans solely based on collateral and additional non-income aspects.

If you’re a U.S freelancer working for a foreign company, you may fail to offer documentation satisfactory to lenders here. In such circumstances, NINA loans may allow the borrower to avoid international asset transfer and document translation.

NINJA Loan

NINJA loans are mortgage types in which lenders don’t attempt to evaluate or verify a borrower’s potential to repay the loan. Simply put, they don’t look into the capability of an individual to repay the loan. So, lenders don’t require any proof of income or declaration.

NINJA is an acronym for “no income, no job, and no assets.” While most mortgage lenders demand applicants to show proof of a steady income source or sufficient collateral, a NINJA loan doesn’t.

Before the 2008 financial crisis, NINJA loans were more general. Following the crisis, the U.S government enforced new policies to improve standard lending practices. NINJA loans are now offered by just a few mortgage lenders in the US.

If you’re looking for a licensed mortgage lender offering no documentation loans, you’re at the right place.

At Atlantic Home Capital, we offer no-doc loans such as No W2 Loans in Ft Lauderdale. Through these loans, borrowers, especially freelancers, can acquire loans without stressing about providing crucial documentation such as W2 forms.

Besides W2 loans, we also offer VA loans, FHA loans, Jumbo loans, etc., in New York and Ft. Lauderdale.

Get in touch with us to speak to our experienced mortgage consultants.