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No-Income Verification Mortgage Loan Disadvantages

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Using a no-income verification mortgage loan is a great way to finance a house if you are self-employed, since it may be difficult to prove your income to a bank. With the help of this type of loan you can get the money you need to purchase a house. However, while it does have its advantages, it is not without disadvantages. Here are a few drawbacks of a no-income verification loan.

High Interest
The biggest drawback to this type of loan is the high interest. When you can verify your income, the bank knows exactly how much you can afford. With this information they can help you stay within your budget and stay within standard risk levels to make your rates lower.

Extra Risk
If you are in charge of verifying your own income, banks know that it is easy to lie about how much you make. Therefore, they know that they are probably taking on more risk than they would like. When you get a house that is more than you can afford, you run a higher risk of default. Therefore, the bank will charge you more for the loan than they would for a loan that goes through the normal channels to make up for this extra risk.