No Doc Loan Explanation

As the mortgage industry expands like mad, more and more borrowing options are available. The No Doc Loan is a relatively new program and here is an explanation.

A No Doc Loan explanation really requires that we first talk about different types of borrowers first. The classic borrower is an employee with a long employment history at one company. They also have excellent credit and little debt. As our economy evolves, this person is becoming rarer and rarer.

Today’s borrower is often a person with a hybrid financial situation. With downsizing, we are seeing more and more self-employed people as well as people that are earning income on commissions, tips and so on. These people have difficult times when it comes to applying to a mortgage loan. Why? Well it is really hard to prove your income. You don’t have the usual paycheck stub and lenders have trouble interpreting exactly what you are taking home each month. For the longest time, people in this situation could not get financing or qualified for low loan amounts.

The No Doc Loan is the lender answer to the income proof situation. The loan is basically what it sounds like. The applicant, you, submits an application stating your income, the price of the property you want to buy and then sit back and wait. The lender will then pull your credit, analyze the property and determine whether it will lend you the money. The No Doc explanation refers to the fact you do not have to submit tax returns and such.

The No Doc loan may sound pretty good at first, but there are some downsides. First, the lender usually ends up asking for documentation of some sort, but it is still far less than with a traditional loan application. Second, the lender considers the loan more risky. As a result, you are going to pay points and a higher interest rate. The specifics of the loan really depend on your situation and the lender in question.

No Doc loans are an excellent option for many borrowers. It is important to understand that lenders offer wildly different financing terms. This means you absolutely must shop lenders to avoid overpaying tens of thousands of dollars on your loan. This is where we come in. We shop loans across a wide variety of lenders. Submit a quick application above or call us today to get a no obligation, free consultation on your loan options.