(Editor's note [Oct. 2014]: Obviously, much has changed since the following article was written in 2006. These days, it is nearly impossible to obtain a no-income verification home equity loan or line of credit (HELOC); lenders will require that you document your income or at least your assets.
Borrowers with irregular incomes can use at least two years of tax returns to document their earnings to qualify for a home equity loan, though lenders will use the lowest of the two years to estimate your income. Such an approach is common for people with irregular or hard-to-document incomes, such as business owners or commission sales people.
Some lenders may be willing to extend a home equity loan based on documentation of banking accounts and other assets if you cannot adequately document your income, though that will also require substantial equity (likely 65 percent or more) and a high credit score to qualify. You'll also pay a higher rate than you would if you could fully document your income.
Note that documentation of income or assets is a must; the pre-crash practice of no-documentation "liar loans" where a borrower could simply fill out a form claiming a certain income and have that be accepted is extinct.
Borrowers who are interested in a stated-income home equity loan may have better luck seeking a cash-out refinance, which some lenders are willing to do based on equity and credit scores alone, though many will require documentation of assets as well. Such loans are more likely to be available on high-value properties than on more modestly priced ones.
The text below is maintained for archival and reference purposes, but is outdated information. )
Do you want to cash in on some of the built up equity in your home in order to make home improvements? It may be tough if you're self-employed or paid on commission, because you may have trouble satisfying a lender's demands for proof of income.
The solution may be a no-income verification home equity loan.
Home equity heaven
These loans can also be a blessing for people who've misplaced documents or need to move quickly to closing and don't have time to collect their paperwork and wait for it to be processed. Just think: no W-2 forms, no pay stubs, no tax returns, no IRS forms. Sound good?
Even though you'll not be required to prove your income, you will have to state it on the application. In some cases, you'll be asked to show that you have a certain level of assets or be asked to prove that you're employed, perhaps by showing a business license.
Beginning October 2, 2006, a new rule allows lenders to have access to the last four years of your federal tax returns for a modest fee. Therefore, they may choose to check up on the authenticity of your statements. As a result, you do need to be honest on these forms.
In most cases, a lender will require good credit and a high credit score for this kind of loan. Even then, the home equity loan rates charged are higher than those on a conventional mortgage to cover the lender's increased risk. As always, shop around for the best rates and loan terms.
If you think that you can't qualify for a home equity loan because you don't have a textbook income, think again. No-income verification loans can help overcome the problem of proving that you're worthy. .