Getting a mortgage can be a difficult process for anyone, but for the self-employed, wealthy, public officials, and others requiring financial confidentiality it can be a real headache. But, it doesn’t have to be if you know what to do. The mortgage loan underwriting process is actually the process through which a lender determines what level of risk of loan payment default a mortgage applicant represents. Determining this risk usually requires the borrower to disclose, compile and provide to the lender a large amount of personal, private and confidential financial information. For self employed and / or wealthy borrowers the problem is usually not the disclosure of financial information it's the compiling and providing of paper documentation to support the disclosure that is a problem. For those requiring very strict confidentiality, such as politicians and celebrities the problem they run into is the disclosure of the information itself. However, there are ways of reducing the documentation required or even waving the requirement for documentation all together if you know what to do. This article will briefly review some of these.

This risk of potential default of a loan is determined by the loan underwriter through the measurement of three main criteria known as the three C’s of credit; Character, Capacity, and Collateral. Character is a measure of the way we have repaid loans in the past and is primarily determined by looking at our credit report. Capacity is a measure of our income versus the loan amount we are requesting and is typically determined by looking at our pay-stubs, 1099’s, W-2''s, personal and business tax returns and financial statements. Collateral is a measure of our down payment in the case of a purchase or home equity in the case of a refinance. Collateral is also concerned with reserves or how much money we have left over after the transaction has been completed. Collateral is primarily determined by looking at our bank and investment account statements. For mortgage borrowers needing privacy disclosing all of this information is the problem with the typical mortgage loan process.

Self-employed borrowers in particular can be required to provide details and documentation about their financial situations that are far in excess of what salaried borrowers have to provide. And, many more people are considered self-employed by mortgage lending standards than is generally known. For example, almost one half of the working population in the Washington DC area are either self-employed, business owners or are compensated on something other than a salaried basis; such as commissioned sales reps. Or salaried plus bonus. For the purposes of qualifying for a home mortgage all of these individuals are considered self-employed. The biggest obstacle in the mortgage application process they run into is the paper documentation required to prove adequate income (capacity) to repay the loan. This documentation usually means disclosing full personal and business tax returns as well as personal and business financial statements. The two most common problems that arise are (1) a lack of required documentation such as a profit and loss statement or (2) a lack of adequate income (capacity) necessary to qualify for the desired loan amount because the borrower has been able to reduce taxable income through effective use of income tax deductions. Any self-employed borrower that has ever applied for a mortgage loan knows what I mean. To self-employed borrowers it often seems that lenders are using this information to prove why they can’t have a mortgage rather than why they can.

Other mortgage borrowers requiring confidentiality, such as public officials and celebrities also face these problems and more. Because much of their income (capacity) is often times already a matter of public record the primary concern for them is in protecting their right to privacy by not having to disclose their assets (collateral) or income (capacity) that is not already publicly known.

Whether the borrowers concern is to protect their privacy by not having to disclose or prove their income (capacity) or assets (collateral), there are actually several options available for getting a new mortgage loan. Below I have listed two general mortgage structures available for accomplishing this goal of preserving privacy. Within these two general structures there are several hundred different ways of structuring mortgage loan interest rates and repayment terms. And there is bound to be a structure that fits the needs of every borrower.

First, the easiest and most popular way for self-employed borrowers to qualify for a mortgage is through the "stated income" or "no income verification" mortgage loan. These loans do not require the borrower to prove income (capacity) to pay back a mortgage loan as long as his credit (character) is good and the down payment or equity position (collateral) is at least 10% of the value of the property. However, the borrower does have to claim enough income to qualify for the loan and show enough money (collateral) available to complete the transaction and still have some money left over in the bank. So, self-employed borrowers can get mortgage loans without all the paperwork commonly associated with getting a mortgage loan. For this loan the borrower IS NOT required to provide any pay stubs, 1099's, w-2's, personal or business tax returns or financial statements. This makes the loan application process so easy that sometimes even salaried borrowers decide to do this. But, the overwhelming majority are, commissioned sales reps. and self employed professionals such as real estate agents, investment advisors, Doctors, Lawyers and Accountants as well as business owners. These loans are usually made available through mortgage loan brokers and usually not through traditional banks. Also, there may be a slight increase to the interest rate for these loan programs versus traditional full documentation loans but the ease of paperwork usually makes it well worth a borrowers time and money. Ironically however the interest rates on these loans are in many instances even lower than traditional full documentation loans because the borrowers character and collateral measurements are usually very high.

Second, the next level of reduced paperwork mortgage loans is the "No-Doc" program or no documentation required loan programs. These loan programs do not require the borrower to prove income (capacity) or to prove liquid assets (collateral) as long as the borrower’s credit (character) is excellent and there is at least a ten percent down-payment or equity position (collateral) in the property. These loans are most popular among borrowers whom want to disclose as little as possible about their financial situation; such as, the very wealthy, public officials, celebrities and foreign nationals or non-resident aliens. On this type of loan there is also a modest increase in the loans interest rate to offset the lenders increased risk in making a loan without documentation to support it. However, again it is usually well worth the borrowers time, money and peace of mind.

There are other mortgage loan programs available that even mitigate the requirement for U.S. credit (character). These loans typically require the borrower to have at least a 35% down payment or equity position in a property to qualify for the loan. These loans are used almost exclusively by people whom have no documentation or credit to show or simply require the highest level of personal privacy. These loans are very popular in the Washington DC area among Foreign Nationals. In any case regardless of what a borrowers situation is there is almost always a way of accommodating the need for privacy.