Is it possible to apply for a home loan without a W-2?

Published on April 9, 2019 under First-Time Home Buyers

Applying for a home loan without a W-2 may require more paperwork but is not impossible. If you are like one of the many Americans who are working for themselves, owns their own contracting business or does not receive a regular W-2, there may still be other possibilities. Before you give up hope, be sure to contact a First Savings Mortgage Lender near you for more information, but here are some steps you can take as you start your path to home ownership.

What are W2’s?

A W-2 form is a form that provides you the information you need to accurately report to the IRS your salary/wage information when doing your taxes. Other information your W-2 may contain is the amounts of federal, state and other taxes withheld from your paycheck. If you have ever had a part-time or full-time job, you have most likely received a W-2. Typically, if you’ve earned over $600 from an employer, you’ll receive a W-2 form.

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

To apply for a home loan without a W2 you will need to provide copies of your tax returns and research the types of home loans available nationwide.

Provide Copies of Your Tax Returns

Many home lenders will use two years or more of tax returns to show that you are producing a reliable, steady source of income. While this may not be income received on a monthly basis, it does indicate your ability to pay a home loan. Combining this information with things like your credit report and your income to debt ratio can help mortgage lenders get a better picture of your financial situation. These tax return documents need to come directly from the IRS.

Research the Types of Home Loans Available Nationwide

A traditional mortgage may or may not be an option for your situation so you should consider other types of loans. For example, in many states a Bank Statement Loan Program may be available. This type of loan is wonderful for the self-incorporated individual. It does not require a W2 but looks instead at your bank deposits for the last 12-24 months, credit score and other assets. If you are a first time buyer, FHA loans could still be within in your grasp if you furnish additional documentation like 2 years of tax returns and 1099s.

How to Improve Your Chances of Qualifying for a loan without a W2

Many of the loans that do not require W2s will be similar in nature. They will look at your debt to income ratio, your earnings provided by 1099s or IRS taxes for the previous two years and your credit score.

How can I improve the likelihood that I will be approved for loans that do not require W2s?

Pay off outstanding debt. This improves your debt to income ratio and your credit score. It indicates to lenders that you are eliminating the likelihood that you will default on future loans.
Stash the cash. The more money you have in savings, the better. Again this helps your debt to income ratio making you a better lending prospect.
Create a larger down payment. This applies for any home loan. The more money you have for a down payment, the less money needed to be borrowed.
Find a co-signer. Another option is to find someone with a steady stream of income to co-sign on the loan with you.

Why Should I Consult With a Mortgage Lender?

Talk with a mortgage lender early in the process because a mortgage lender can help you understand the types of documents you will need or what kind of options are available. Aside from the large nationwide lending programs already mentioned, there are other lending institutions that may be unfamiliar to you but that an experienced mortgage lender interacts with regularly. They may suggest some other options to get you started on your path to home ownership. Some loans may require larger down payments or have higher interest rates but once you establish yourself as a reliable and credible customer, you may find numerous options beyond a conventional loan.