No Doc Mortgage Loans
by Rachelle
What are no doc mortgage loans? Simply put, no doc mortgage loans are home mortgages where relatively little documentation is required in the loan application process.
The standard mortgage process involves divulging a tremendous amount of personal data to win the trust of the lender. For people who value their privacy or are in other specific situations where providing the standard data is difficult, no doc mortgage loans may be an excellent option.
No Doc Mortgage Loans
However, you should understand that a no doc mortgage, like any so-called no doc loans, doesn’t literally mean you don’t provide any documentation at all. The term “no documentation mortgage loans” is really a misnomer. At the very least, you will have to allow a credit check as well as submit for a property appraisal.
This isn’t a method to obtain a bad credit no doc mortgage — such a thing doesn’t exist; this is an option for people like the self-employed or the very wealthy who may either prefer greater privacy or have an unusual income circumstance. Just as 0 down home loans aren’t supposed to be for people who can’t afford a mortgage otherwise, no doc mortgage loans aren’t for people trying to hide their bad credit.
The Price of Privacy: No Doc Mortgage Loans Cost More
You will pay more both up front and each month with a no doc mortgage loan or no doc home equity loans. No doc mortgage lenders and no doc mortgage rates will always cause you to pay a premium above the interest rate you would otherwise obtain. In most cases, you must also make an exceptionally high down payment and have exceptionally good credit.
Good, legitimate mortgage lenders usually attempt to convince borrowers to avoid no doc or low doc mortgage loans because they are so much more expensive.
Before you try to obtain a no doc mortgage loan, I suggest you contact a trustworthy bank or credit union and discuss your situation and your needs. If you have excellent credit and plenty of money to make a down payment, you may not need to resort to a no doc home loan. You should also note that, like some people who make the mistake of seeking a no money down home mortgage when they can’t afford a standard loan, you should not be seeking no doc mortgage loans just to hide your bad credit. These loans are not a way for you to hide your poor credit. In fact, you need exceptionally good credit to obtain a no doc mortgage loan.
Generally, the less the documentation you are willing to provide, the higher the rate you will have to pay. So give a good mortgage broker the opportunity to show you how you can document everything before assuming you must pay the premium for the no doc loan or no doc refinance.
How to Apply for A No-Doc Mortgage Loan
Because of the housing market crash and the subprime lending crisis, low doc as well as no doc mortgages have become even more difficult than usual to obtain. In fact, many major lenders don’t even offer them right now.
So, are no doc mortgages still available? Well, they’re rare.
But if you find a bank or credit union (you have considered credit unions, haven’t you?) offering no doc mortgage loans and you have the money and credit to obtain one, you will find the process less tedious than the typical mortgage process. Basically, you will provide your social security number, your name and the property appraisal data. The lender generally takes care of the rest.
Keep in mind that most no doc mortgage loans require an exceptional credit score and sizable down payment to qualify. If you’re not self-employed or have an otherwise non-traditional income circumstance, you will likely be better off applying for a more traditional mortgage loan.
3 Main Types or No Doc Mortgage Loans
You will find three primary types of no doc home loans normally available.
No Doc or NINA
The simplest and most privacy-rich option is the straight No-Doc loan, otherwise known as a NINA mortgage. NINA stands for “no income, no asset” and implies that your income and assets don’t need to be verified. It is sometimes also referred to as a no income verification mortgage.
While this option provides optimum privacy and the ultimate in ease, you really need to have a ton of money for a down payment as well as an excellent and long credit history. This is the kind of home loan often sought by celebrities, for example.
Stated Income Mortgage (or Low Doc Loans)
Stated income mortgages is often the best choice for self-employed individuals or people whose income is mostly comprised of tips and commissions. Because data must still be provided regarding their income, it is often referred to as a low doc mortgage loan rather than a no doc mortgage loan.
No Ratio Mortgage Loans
No ratio loans are also sometimes referred to as NINA mortgages, like no doc loans. They are similar to no doc loans in that income doesn’t need to be fully disclosed. It is referred to as a no ratio mortgage because the lender isn’t provided with a debt-to-income ratio to evaluate.
No ratio mortgage loans are often utilized by the wealthy, retirees living off investments, or people living through some kind of unusual financial circumstance, such as a divorce.
So Who Should Really Consider These High Priced Loans?
There are basically two different situations where these no doc mortgage loans may be a good idea. The first is simply people who are very serious about their privacy. Professional athletes, rock stars and movie stars often are willing to pay a premium for privacy. This isn’t to imply you must be a celebrity to care about privacy, but it is often people who might have people nosing about their business that seek a no doc home loan.
The second situation is for people who have a non-standard income situation. This could mean you’re self-employed or your work involves receiving a large percentage of your income in untaxed income, such as through commissions or through cash (tips).
So before you commit yourself to seeking no doc mortgage loans, consider whether it is really necessary. Simply put, the more information you’re willing to share with a lender, the more likely you’ll get a good loan for a good interest rate. I would only consider a no doc mortgage loan if it is really necessary for your particular circumstance.