APRIL 15TH, 2024

NO-DOC Mortgage Loans

The mortgage industry terminology for a “No Doc” loan is an abbreviation for “no documentation loan.” This program is likely the most misunderstood of common mortgage programs. There are quite a few potential borrowers as well as inexperienced or even experienced mortgage professionals who refer all types of limited/reduced documentation loans as No Docs; this presumption is wrong and actually creates a great deal of confusion for those looking to purchase/refinance a home. Some lender establishments receive contact from frustrated potential borrowers who may be having difficulties with their current lender as the lender either does not understand the consumer needs a true No Doc loan or they may even be incorrectly quoted the rates/points, etc.

No Doc Mortgages loans are mortgages for which lenders require no to little documentation so long as the borrower is able to put down a sizable down payment, typically 25% or more. This mortgage program is quite common among Self-Employed consumers who indicate they earn a certain amount of money but have tax returns that show their earnings are much lower. No Doc mortgage loans do not require income, asset, nor employment verification. Consumers should not need W-2’s, tax returns, paystubs, banking statements, as well as verifiable assets, etc. Consumers should not be asked to “state” their income. Some lenders do offer an Interest Only option for No Doc loans, including the 30-year Fixed-Rate program. Some lenders also offer a 100% No Doc loan (80/20) even for first time homebuyers as long as the consumer has a 660 or better middle credit rate/score.

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About No Doc Mortgages

Is it Possible for A Consumer Who is Unemployed Obtain a Mortgage Loan?
Typically, lenders will not make mortgage loans to those consumers who are unemployed since a consumer without an income would presumably have no way to make monthly mortgage loan payments. But, consumers should be aware that there are home loans for which lenders will require no or little documentation so long as the borrower is able to put down a sizable down payment (25% or more). Note: Potential borrowers should check with lenders directly when desiring to obtain a “No Doc” mortgage loan. Should a lender(s) not offer this program, consumers should ask for a referral to a lender that does.

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Advantages & Disadvantages of No Doc Mortgages

The premium advantages of No Doc Mortgages are: 1) A program designed for those consumers who have difficulty verifying all of their income such as Self-Employed borrowers, Commissioned professional borrowers, as well as Service-Industry professionals that could be classified as Bartenders, Waitresses, Hair Stylists, etc.; 2) Lender does not require proof of income & assets; 3) No ratios (debt to income, housing to income).

The main disadvantages of No Doc Mortgage are: 1) Higher interest rate due to higher risk; 2) larger down payment required; 3) Higher credit standards.

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