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An Introduction to No Doc Mortgage Loans

Posted by  on Apr 16, 2009
 
If you are looking for a mortgage loan and your income, assets or employment are hard to verify, you could have a difficult time securing a loan. Whether you are self employed, dealing with varying income (or in some cases, tip income), or other complicated situations, it pays to look for the more flexible and simple mortgages on the market, and you will get that with a no documentation mortgage loan, also known as a no doc loan.

No documentation mortgage loans are good for people who might have trouble qualifying for a traditional mortgage because of their situations, however do not expect to get a no doc loan with poor credit — your credit score and identity are two of the only things that the lender will need to verify, along with the value of the property that you intend to purchase.

True no doc loans are available at a slightly higher interest rate than a traditional mortgage. However, you should be able to get the loan. In another situation you may run up across the problem of a lack of proof for one of the many aspects that a traditional loan takes into account. You know what you are capable of, and if you know that you can handle your mortgage, then a no doc loan might be the way to go.

If you want to shave a few points of interest off of your mortgage loan, you can look for a variation of a no doc mortgage loan known as a no ratio loan. These loans still do not require income information; however you will have to prove that you are at least employed and be able to verify your assets as well. Because there is no proven income, no debt ration can be calculated, which is where the term no-ratio comes from.

Another variation on the no doc mortgage loan is the stated income mortgage loan, in which the income doesn’t have to be proven but must at least be stated (and it must be reasonable in light of the employment information and the asset information). There are stated asset variations available for this kind of loan as well. Overall, this is the cheapest of the no doc type mortgages, only just a little bit more expensive than a traditional mortgage.

No doc mortgage loans can be harder to get when the market is depressed, however if you can find a place that will qualify you, you can purchase a home, an investment property, or a vacation home with a small down payment depending on your credit score. Your lender will be able to help you determine which option is best for you, what you need to do to qualify, and how much of a down payment your credit score demands.

There are many kinds of people who can make good use of no doc mortgage loans, including people in the restaurant business, who often cannot prove their tip income or do not have a reliable tip income, people who work seasonal jobs, who cannot prove that their income is steady, or people who work for themselves, whose income would depend entirely on their efforts and their luck.

Although you can get a no doc mortgage loan even if you do not necessarily need one, it is not the best idea because of the slightly higher interest rates that come with these kinds of loans. The difference can be significant depending on whether you are looking at a stated income mortgage loan, a no ratio loan, or an actual no documentation mortgage loan, which will incur the highest interest rate.

Finding a lender who offers no documentation mortgage loans can sometimes be a challenge, because although many lenders will allow for no ratio or stated income loans in a good market, not terribly many are willing to take the chances on an actual no doc mortgage, and many shy away from the variations of the no doc mortgage when the pendulum swings the other way, market begins to turn around again, and house prices begin to fall.

If you have the money to pay the extra interest rates and the funds and will to buy a house, then look for a lender who will offer you a loan with as little as five percent down payment on a primary residence as long as your credit is good. Keep in mind, though, that your credit will be important no matter what kind of loan you are trying to get — you will have to turn to sub-prime lenders if you intend to get a mortgage with poor credit, and you might not be able to get a no doc loan in that case.

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