Self-employed Henrico buyers often show low taxable income after write-offs, from Short Pump business owners to Glen Allen consultants. That leaves many of them asking whether a mortgage without tax returns required is possible. It is, with a caveat: “no tax returns” means alternative documentation, not no documentation. Federal ability-to-repay rules under CFPB Regulation Z still require a reasonable verification of income or assets. The pre-2008 “no doc” loan did not come back unchanged.
Written by Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC NMLS #376205
Duane Buziak is a mortgage broker based in Glen Allen who helps Henrico County buyers and homeowners compare loan programs. Below are seven documentation paths, who each one fits, and the trade-offs. Most are non-QM (non-qualified mortgage) programs, which are not guaranteed approvals and generally carry higher rates and larger down payments than agency loans. Terms change often, so treat every figure here as an illustration and ask for a custom quote.
1. Bank Statement Loans
A bank statement loan replaces the tax return with 12 or 24 months of deposits. For business accounts, the investor applies an expense factor, a percentage of deposits assumed to go to operating costs. A 50% factor is a common illustration, but the actual figure depends on the program and your business type. The method works because deposits show real cash flow that write-offs on a return can hide.
Here is a fully worked illustration. Suppose a Short Pump contractor has $240,000 in qualifying 12-month business deposits and a 50% expense factor. That gives $120,000 a year, or $10,000 a month in qualifying income, even if the return shows far less.
Now buy a $500,000 home with 20% down ($100,000), leaving a $400,000 loan. At an assumed 7.5% rate on a 30-year term, principal and interest is about $2,797 a month. Add an assumed $350 for property taxes and $150 for insurance, and the housing payment is about $3,297. With $600 in monthly car and card payments, total debts are about $3,897. Divided by $10,000, the debt-to-income ratio (DTI) is about 39%. The rate and tax figures here are placeholders, not a quote.
How to put it into practice:
- Gather 12 to 24 consecutive months of statements.
- Confirm the account is in your business name.
- Add a business license or a CPA letter.
- Let Duane Buziak match the program and expense factor to your business.
Common mistake: mixing personal transfers, loan proceeds, and one-time deposits into the business account. Those get excluded, which lowers your usable deposits. Keep the account clean for a few months before applying.
What to measure: qualifying income against the proposed payment (DTI), and the rate gap versus an agency loan. If the gap is large, ask whether a different documentation path closes it.
2. 1099-Based Income Programs
If most of your income arrives on 1099 forms, some programs qualify you on gross 1099 earnings rather than the net figure on your return. The logic is that the 1099 is a third-party record of what clients paid you. Some programs apply an expense adjustment, and others use year-to-date earnings alongside the forms.
For example, imagine a Glen Allen sales consultant with two years of steady 1099s from Innsbrook-area clients. The consultant deducts heavily, so the return looks thin, but the 1099s show consistent gross income. Under a 1099 program, that gross figure, less any required adjustment, becomes the starting point.
The pitfall is assuming a brand-new contractor with one client will qualify. Investors look at income history and client diversity, because a single client can disappear. A consultant three months into independent work usually needs a different path or more time.
To prepare, collect these:
- 1099s for one to two years
- A year-to-date earnings summary
- A CPA letter, if the program requires one
Then confirm the specific investor guideline before you commit. The measures that matter are the months of documented 1099 history and how stable the year-over-year totals are. A dip in one year is not disqualifying, but you should be able to explain it.
3. Profit and Loss Statement Programs
A profit and loss (P&L) statement program uses a statement prepared by a CPA, enrolled agent, or tax preparer to support qualifying income, often alongside bank statements. It suits owners whose books are stronger than their returns, such as a business that grew sharply this year or one with one-time deductions.
Imagine a Lakeside restaurant owner with disciplined bookkeeping. A 12-month CPA-prepared P&L shows higher net income than the return because of a large equipment write-off last year. The preparer’s name and credentials carry weight with the investor, which is why the document has to come from a qualified third party.
The most common mistake is submitting a self-prepared P&L, or one that does not tie to bank deposits. Underwriters compare revenue on the P&L to what actually hit the account, and a mismatch raises questions that can stall the file. If your P&L shows $480,000 in revenue and your deposits total $350,000, expect to explain the gap in writing.
To put it into practice:
- Ask your CPA for a P&L covering the required period.
- Confirm the preparer meets the investor’s rules.
- Provide proof of business ownership.
Measure the match between P&L revenue and bank deposits, then the qualifying income that results. If those two numbers disagree, fix the books before you apply.
4. DSCR Investor Loans
A debt service coverage ratio (DSCR) loan qualifies an investment property on its own rent. Your personal income and tax returns are not used. These loans are for investment properties only, never a primary residence. This is a Segment A style path for Short Pump and Innsbrook owners building rental portfolios.
The math is simple. Suppose a property rents for $2,600 a month and the full payment (principal, interest, taxes, insurance, and any HOA dues, called PITIA) is $2,300. The DSCR is $2,600 divided by $2,300, about 1.13. Many programs set a minimum near 1.0 or 1.1, but minimums vary, and a higher ratio can unlock better pricing and a higher loan-to-value (LTV) tier.
Expect a larger down payment and cash reserves than with an agency loan. As of this writing, 20% to 25% down is a common range, and it can move.
Steps to prepare:
- Get a signed lease or a rent appraisal.
- Calculate PITIA with real taxes, insurance, and HOA dues.
- Set aside the down payment and reserves.
Common mistake: trying to use a DSCR loan for a home you will live in, or leaving HOA and insurance out of the ratio so the property looks stronger than it is. Measure the DSCR against the program minimum, and note which rate and LTV tier it unlocks.
5. Asset Depletion and Asset Qualifier Loans
Asset depletion converts eligible liquid assets into monthly income by dividing them over a set number of months. It suits retirees, sellers who just cashed out of a business, and high-net-worth buyers whose income is lumpy. This is another Segment A path.
For example, imagine $1,200,000 in eligible assets divided by an assumed 84 months. That equals about $14,286 a month in qualifying income. The divisor varies by program, and some assets, such as retirement accounts or stocks, may be discounted with a “haircut.”
The key trap is counting the same dollars twice. If $200,000 of that $1,200,000 goes toward your down payment, it cannot also generate qualifying income. Structure the purchase so the remaining assets still support the number you need.
To put this into practice:
- Provide two to three months of asset statements.
- Confirm which accounts count and any haircuts.
- Decide the down payment, then recalculate income on what remains.
Measure post-closing eligible assets and the qualifying income figure after the divisor. Run the numbers both before and after the down payment so there are no surprises in underwriting.
6. Streamline Refinances (FHA Streamline and VA IRRRL)
If you already have an FHA or VA loan, a streamline refinance may skip full income re-verification and tax returns. The VA Interest Rate Reduction Refinance Loan (IRRRL) and the FHA Streamline both exist to lower the cost of an existing government-backed loan, subject to program rules. Review the current requirements on the VA.gov IRRRL page and in the HUD FHA Single Family Housing Policy Handbook.
Imagine a Wyndham homeowner with an existing VA loan who refinances through an IRRRL to a lower rate without submitting tax returns. That assumes eligibility, payment history, and the net tangible benefit test are all met.
The mistake is assuming every refinance can skip income documents. A conventional rate-and-term refinance cannot, and a VA cash-out refinance (up to 100% LTV) has its own documentation. Conventional cash-out refinances top out at 90% LTV and need full documentation. Do not confuse the IRRRL with those.
Before applying:
- Confirm your current loan type.
- Check your payment history.
- Test the net tangible benefit.
- Verify current rules on VA.gov or HUD.gov.
Measure monthly payment savings and the break-even point in months on your closing costs. If you will not stay in the home past break-even, the refinance does not pay off.
7. Work With a Broker Who Can Compare Programs
The right documentation method depends on how you earn, and no single program fits everyone. A mortgage broker has access to hundreds of wholesale lenders and can match your income type to the program that prices it best. A single-shelf lender can only offer its own guidelines, even when another path would suit you better.
Imagine a self-employed Twin Hickory borrower compared across a bank statement program and a P&L program. One shows a lower rate with a larger down payment, the other the reverse. Without both scenarios on the table, the borrower would never know the trade-off existed.
The starting point is the NoTouch Credit Pull, a soft-pull pre-qualification with no impact on your credit score. Then:
- Share your document checklist.
- Request side-by-side scenarios.
- Choose the program with the lowest total cost, not just the lowest rate.
Common mistake: applying to one place first, taking a hard credit pull, and learning afterward that another documentation path fit better. Measure the number of workable program options and the side-by-side rate and cash-to-close comparison. Pre-qualification itself should not touch your score.
Where to Start: A Soft-Pull Conversation Before Any Paperwork
Start with item 7. Call Duane Buziak at 804-212-8663 for a pre-qualification conversation that does not affect your credit. Then match the documentation method to how you earn: deposits for bank statements, 1099s for contract work, a CPA’s P&L for a business with strong books, rent for investment properties, or assets for the cash-rich and income-light. Streamlines are the exception, since they depend on the loan you already hold. Many Henrico households can also consider no-out-of-pocket closing options, which a broker can explain case by case.
Your dream home in Henrico County is closer than you think. Discover exactly what you can afford with our credit-safe pre-qualification process that protects your score while unlocking your options. Get pre-qualified today and take the first step toward homeownership with a local mortgage expert who understands your community. Henrico Mortgage by Duane Buziak has been helping families find their new homes since 2014.