No Doc Mortgage Loans may also be referred to as Low Doc Mortgages. Contrary to its title, at least a report on credit standing and a valuation of property to support the application is still needed. There is, however the undeniable decrease in document requirements compared to standard loan applications.
Many borrowers are self-employed or thrive on commissions. Due to the variable nature of their income unlike paycheck earners, documentation of specific earnings is preferred to be kept hidden or undocumented. As a result, these borrowers are willing to pay the price for approval flexibility and privacy. Increased interest rates and substantial down payments are willingly contended with. Apart from these extra costs, these private individuals are expected to uphold excellent credit disciplines.
Not all Loan Specialists agree with this No Doc Mortgage, however. Many loan specialists believe that an applicant's desire to keep some information undocumented in the belief that their generation of income is truly 'un-documentable', is not substantial. They (the loan specialists) know that if these borrowers just take the time to seek the advice of qualified loan officers, proper documentation can be produced to support their applications.
There are three types of No Doc Mortgage Loans.
Stated Income Mortgages - This is generally for people who are not paycheck workers. This means that other sources of income like commissions and tips contribute to the individual's monthly income. Self-employed entrepreneurs are also classified under this mortgage.
Apart from bank statements, tax returns and Profit and Loss statements, lenders will review debt-to-income ratio in the evaluation of stated income mortgages. The interest rate for stated income mortgages is about half a point higher than standard cash loans.
No Ratio Mortgages - The ratio referred to in the title is the debt-to-income ratio. In this type of loan, no information on income and tax returns are divulged. In fact, this type of No Doc Mortgage is also casually called the don't ask, don't tell mortgage. It precisely adheres to the 'mind your own business' policy of many individuals who prefer to keep financial analysts away from their personal earnings and financial activities.
Applicants for this loan submit a list of assets as the basis for the approval. Interest rate for no ratio mortgages can range from half a point to as much as 3 points higher than the standard cash loans.
No Income/ No Asset Verification Mortgages - This is what Hollywood stars would go for as it requires the least documentation. It only requires the borrowers name, social security number, the address of the property being bought and the amount of down payment. An excellent credit score and a 100% bill payment policy merit approval.
Interest rate for this mortgage can go as high as 3 points versus standard mortgages.
Overall, regardless of which type of No Doc Mortgage is preferred, the key signifier of this type of mortgage is summed up in 'respect for privacy'. It really doesn't matter whether one is an honest to goodness free lance entrepreneur or a blockbuster lead role player or even the kingpin of a crime group. This financing method is designed to keep private matters private.
