No Doc Mortgage

The no doc mortgage has been the subject of much controversy over the past few years ever since the real estate market weakened and the recession took full effect. Some have argued that the no doc mortgage played a significant role in causing such turmoil, and others have argued that no doc mortgage loans should be taken off the market completely. No doc mortgages have not been take off the market completely but they have been reduced significantly ever since the inception of these crises and the reasoning for this is actually two fold.

First, the lenders of no doc mortgage loans have become wary to making such loans due to the losses they have sustained over the past two to three years. Before about 2008 no doc mortgages were provided without much regulation to almost any kind of potential homeowner you can think of. A potential borrower did not have to support their income and therefore many borrowers who couldn’t afford homes were still able to purchase property. This ultimately resulted in the foreclosure of many homes along with accumulation of a whole variety of worthless no doc mortgages. Lenders have become much more strict as a result of this mess, and if you are thinking about getting a no doc loan nowadays you are typically going to have to show the lender that you are a trustworthy applicant via your credit score and other information.

Second, the demand for home loans has decreased considerably and the entire lending industry has contracted as a result of this. This has affected all sorts of loan products—from no doc mortgages, no 80 20 splits, to home equity lines of credit. Experts have said that the demand will slowly increase over time and that it is currently rebounding but nobody knows if it will ever get back to the pre-2008 levels. Regardless, the no doc loan is still available to qualified applicants and if you are interested in obtaining such a loan then you must know some of its most relevant attributes.

There are essentially three types of no doc mortgages still on the market. First is the stated-income mortgage, and this kind of low doc/ no doc mortgage tends to be right for individuals who make an income but not as a result of working for a standard employer. If you are self-employed, or own your own business then this kind of mortgage loan may be right for you. You will still have to disclose your income for two years or more to a particular lender, and to prove such income you will actually not have to show the lender the typical kinds of documents that can prove such income such as pay stubs or W2 forms.

Most lenders will instead consider tax returns, profit and loss statements, and bank statements as a means to verify your income, and they end up requiring you to list all of your assets and debts. Be careful as many times stated-income mortgages may be advertised as no doc mortgages but in the end will require almost the same kind of documentation as a standard mortgage.

These kinds of mortgages are truly no doc in the sense that they don’t require their borrowers to declare any of their income, and they do not have to provide pay stubs, W2s, or tax returns. The lender doesn’t even compute a debt to income ratio because of the fact that you don’t provide them with your income. These types of no doc loans are great for the wealthy and retirees who may live on investments so if you fall into one of these categories then by all means apply.

No income/ no asset verification loans, or NINA, actually require less documentation than the no ratio loans and they are ideal if you want a maximum level of privacy and you are willing to pay for it. No income documents are required at all for these kinds of mortgage loans, and sometimes even a credit check isn’t performed. If these kinds of no docs sound good to you then you must be aware that you’ll pay for that added level of privacy in terms of a higher interest rate—sometimes higher than three percent more than you would typically. These loans require the least in terms of documentation so if you are willing to pay the higher rate then you should not hesitate to look for a qualified lender that can provide with this kind of no doc loan.