Secured loan against paid off house... good credit, income under the table

[entrepreneurguy]

I own a house that is "paid off", despite a 30k mortgage to a family member. There is no 1098 mortgage interest form sent to the IRS at the end of the year. I don't think this mortgage is visible to anyone except his financial adviser who handles all his money. I checked my county's register of deeds online and they only show a quit claim deed when I got the house, no mortgage. All of my income is under the table, and I have good credit (around 700+). I can show bank statements but I only deposit enough money to pay bills and buy stuff on ebay, the rest I keep in cash. I might deposit around $1500 per month on average.

I'm not sure if this is possible in my situation, but I was thinking about getting a secured loan against my home (worth 90-110K) to either buy or open a business or purchase a rental property. Or, a HELOC if I qualify. I've heard that a secured loan against a house is very low risk for the lender, so it's easier to get one. But in my situation, with no provable income, will anyone lend to me? Just looking for some insight on how these loans work and how easy/difficult it is for someone like me to get one.

[Evan Bedard]

I'm not sure if this is possible in my situation, but I was thinking about getting a secured loan against my home (worth 90-110K) to either buy or open a business or purchase a rental property. Or, a HELOC if I qualify. I've heard that a secured loan against a house is very low risk for the lender, so it's easier to get one. But in my situation, with no provable income, will anyone lend to me? Just looking for some insight on how these loans work and how easy/difficult it is for someone like me to get one.

Welcome to the forum.

Unfortunately, with no verification of income, paystubs, or tax returns from recent years I do not think it will be possible to obtain a loan against the property.

[entrepreneurguy]

Thanks for the reply. I have tax returns for each year up until 2011(that is, for the 2010 tax year), but in recent years they were pretty negligible. I have income from an online business that uses paypal to process payments, but if you accept less than $20k in payments per year with paypal, they don't report it to the IRS. I'm under the $20k mark, so none is reported but I have bank statements and paypal account statements. I also have rental income from renting rooms out in my home. This is all cash but I could always get receipts.

Coupled with my bank account statements, do you think the above might be sufficient or no?

[Evan Bedard]

Coupled with my bank account statements, do you think the above might be sufficient or no?

It is worth a shot, if you are able to supply 2010 tax returns and receipts from renters along with paypal statements you can at least prove you have income coming in.

[entrepreneurguy]

My bank said no way without paystubs or W2s. Will they require both paystubs AND W2s?

I have an idea but need some input. I have a current LLC set up that I don't use for anything, yet. It's active and in good standing, I just don't use it. I have detailed records of every penny I make, so what I was thinking was to use payroll software to print out paystubs for the exact amount I earned each month for the last 2 years. Although I did not earn the money through the LLC, I am not lying about the amount of money I make, just claiming I made that money through my company when in fact I made it outside the company. While I know it might sound bad, I don't see anything wrong with this as I am only trying to prove money that I really did make. But, if they check W2s, they won't match up with the paystubs. So, do you think this could work, or will they verify my W2s anyways?

[entrepreneurguy]

Also, if they want tax returns, does the lender request them from me and then verify them with the IRS?

[fredk]

they will want paystubs, w2, AND tax returns

you would have to falsify all 3 to fool them

but even if yu do this you will get caught anyway because they will require you to sign a form allowing them to get your tax information directly from the irs

[entrepreneurguy]

Thanks for the info. It's a shame that someone with a 700 credit score, a home worth 110k, and makes 50k a year cant get a secured loan against a property that's paid off! Are there no stated income loans available anymore? I can understand not doing a stated income loan for a mortgage but I am putting my home up for collateral which is worth 3x what I am looking to borrow... where's the risk?