For those who want a home loan, but wish to keep financial information private, a no doc mortgage may be available. These mortgages require little paperwork for a loan application. They may require no information on employment, salary or supplying information on outstanding debts. While the application process for these loans makes them incredibly attractive, a no doc mortgage loan is often available only to those with the highest credit scores and may offer higher interest rates than loans with a more extensive application process. There are three basic types of no doc or low doc loans available. Before deciding which type of loan is right for you, familiarize yourself with the pros and cons of each.
Most people who apply for low or no doc loans are those who own their own businesses, employees who do not draw a regular salary such as those on commission or people who work for tips, or freelancers. The application of these loans is different in that salary is often self reported and there is no need to supply documentation of income. Because these loans may be riskier for lenders, no doc mortgage loans are usually offered to people with the highest possible credit scores. If a borrower has any late or missed payments, too much outstanding debt or any balances that have been settled, the application will probably be denied.
No ratio loans are one option available for those who do not wish to disclose income. “No ratio” refers to the fact that the amount that may be borrowed is not calculated based on the borrower’s income. Once again, this loan requires great credit and a large bank account. During the application process, an applicant will outline the full scope of their assets to show financial stability and give credence to their ability to repay a loan.
Stated income, or low doc, loans do require documentation, but not to the same degree that a traditional loan would. For this type, a borrower who works on a commission or freelances provide potential lenders with two years of payment history or bank statements to provide an estimate of future earnings. As the level of income is not assured, be prepared to supply a larger down payment than a traditional loan would require.
True no doc loans are hard to come by. The application is by far the simplest, often requiring nothing more than a social security number and information on the homes appraised value. The lender will examine a borrower’s credit report, and those who have never missed a payment and have no other negative marks may be eligible with no further information. Even though there is no paperwork required of the borrower, it may be in your best interest to check your credit report before applying to make sure a history warrants this type of loan.
Great credit history opens the door to more than just a no doc mortgage. Qualified applicants may also look into no doc refinance loans and no doc home equity loans. These will speed the application process and keep financial information as private as possible.
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