One of the many benefits of owning a home is the ability to borrow against the paid-off portion of your property through a home equity loan or home equity line of credit. Given that home equity mortgage options are secured through property, lenders are often more willing to offer lower interest rates than other forms of debt, such as credit cards or personal loans.
In some cases, it’s possible to qualify for a HELOC even when you’re unemployed or unable to verify your income. In this blog, we’ll discuss everything you need to know about no-income verification HELOCs, including how to get approved for one and alternative financing options for those who may not qualify.
Can you get a no-income HELOC without having a job?
It's possible to get a no-income verification HELOC without a full-time job as long as you have some form of cash flow. Not having a job isn’t the same as not having an income. Many homeowners manage to pay off their mortgage loans consistently without steady employment.
This is because they’ve established alternative income streams through investment dividends, rental income, freelance income, government assistance, veteran’s pensions, family remittances, or alimony. These same income streams can be used to qualify for a no-income verification loan with select lenders.
No-income verification mortgages are available for homeowners who are out of work for a variety of reasons. If you've qualified for a no-income verification mortgage in the past, or have recently found yourself out of work, you may qualify for other no-income verification loans, such as a no-income verification HELOC.
How to get a no-income verification HELOC
If you’re out of work for whatever reason, whether it be due to retirement, a medical disability, or to care for an aging parent, you can qualify for a HELOC. Here’s what you need to know about applying for a HELOC when you’re unemployed:
Present all non-traditional sources of income
To improve your chances of getting approved any income you receive should be included in your HELOC application. The following forms of income are appropriate to include:
- Social security payments
- Unemployment benefits
- Disability income
- Pension payments
- Family remittances
- 401(k) distributions
- Rental property income
- Spousal support or income
- Government assistance
- Interest earned on savings account
- Dividends earned on investments
- Trust distributions
- Child support
Lower your debt-to-income ratio
Lenders assessing an applicant without a regular job may put a greater emphasis on an applicant’s debt-to-income ratio. Most home equity loan lenders limit borrowers to a debt-to-income ratio of 43%, although some lenders allow for a DTI ratio of up to 50%. If you're above these percentages then you'll need to either pay off some of the debt to decrease your monthly debt payments or increase your income.
Raise your credit score
Another factor that lenders pay close attention to in the absence of regular income is an applicant’s credit score. If you have a history of falling behind or defaulting on other debts, lenders may be hesitant to approve you for a HELOC. A credit score of 670 or above with no late payments is a good credit goal to set.
Wait until you meet the equity requirements
A key aspect of being able to take out a home equity line of credit is to have enough equity accumulated in your home. If you don’t have enough equity in your home, you can wait it out and reapply at a later time. Lenders usually allow you to borrow up to 85% of your home's equity.
Add a co-signer or co-applicant to your loan
Including a co-signer or co-applicant in your HELOC application can improve your chances of getting a loan, especially if your co-signer or co-applicant has a steady income and good credit. This is because HELOCs and home equity loans with shared responsibility are less risky for mortgage lenders.
Choose a lender that targets consumers without verifiable income
Some lenders only loan to high-credit borrowers, while others have more lenient criteria and are willing to issue loans to borrowers with average or below-average credit scores. If your score is less than ideal, look for lenders with more flexible requirements.
Alternatives to no-income verification HELOCs
Applying for a HELOC may not be possible for time-constrained homeowners. Finding a reliable co-signer, raising your credit score, and lowering your DTI ratio can take a considerable amount of time. Here are some alternative financing options to no-income verification HELOCs:
Stated income, stated assets (SISA)
A stated income-stated asset mortgage (SISA) loan allows a borrower to declare their income and assets without presenting verification documents. SISA loans are designed to make it easier for self-employed homeowners to apply for a loan. These kinds of stated income loans can also be beneficial for business owners who keep most of their assets in a business account.
Stated income, verified assets (SIVA)
A stated income, verified assets (SIVA) loan is a type of loan that allows borrowers to declare monthly gross income on their loan application without providing tax returns or pay stubs. SIVA loans don’t require income verification but they do require asset verification. These kinds of bank statement loans are helpful for homeowners with income sources that are hard to document, such as servers who earn their income in tips.
No income, verified assets (NIVA)
No Income, Verified Assets (NIVA) loans, are similar to SIVA loans, but differ in that they don’t take into consideration standard income documentation such as tax returns, pay stubs, or bank statements. Instead, NIVA loans focus solely on a borrower's assets as collateral, such as retirement and savings accounts. NIVA loans make sense for retirees with substantial cash reserves but insufficient income for traditional loans.
No income, no assets (NINA)
NINA loans, or No Income, No Asset loans, were popular during the subprime mortgage crisis but are now only available for real estate investors. Also known as "no-doc" loans, NINA loans don’t require income or asset verification. They only require employment status verification.
Reverse mortgages are designed for homeowners 62 and older who don’t want to move out of their homes. In a reverse mortgage loan, homeowners can access their home’s equity through a regular income, a line of credit, or a lump-sum payment. Instead of the borrower making payments to the mortgage lender, the mortgage lender makes payments to the borrower. Homeowners can usually access 40% to 60% of their home's appraised value. Repayment occurs when the home is sold.
Home Equity Investment
Another way of tapping into your home equity without a steady income is through a Home Equity Investment (HEI). Point’s HEI product allows homeowners to receive a lump sum of cash in exchange for a portion of their home’s future appreciation. The funds can be used for any purpose and aren’t subject to any income requirements, monthly payments, or a perfect credit score. Homeowners can take out between $25k and $500k and make a single payment either at the time of sale or when they decide to end the agreement at any time during the 30-year term.
Final thoughts on no-income verification HELOCs
Obtaining a HELOC without a job is possible as long as you have some form of income. A no-income verification HELOC isn’t a specific loan product, but rather a term used by lenders who are willing to work with borrowers without traditional income documentation. Targeting these lenders will save you time in the application process and increase your chances of being approved.
When applying for a no-income verification HELOC, make sure to include all of your monthly income sources including, pensions, government assistance, spouse's income, rental income, and other financial support. You should also focus on meeting home equity requirements, reducing your debt-to-income ratio, and enhancing your credit score. Consider bringing on a co-signer or co-applicant with a reliable income and strong credit if you’re unable to improve your HELOC application on your own.
If you’ve determined that a no-income verification HELOC isn’t for you, consider alternative loan options such as SISA, SIVA, NOVA, and NINA loans. Reverse mortgages and HEIs are also viable financing options for homeowners with less-than-perfect credit scores and inconsistent or insufficient income. Visit Point to find out if you qualify for an HEI.