What are no-doc loans? No doc is short for no documentation. These are loans for which the bank or other mortgage lender doesnt require any documentation of income or employment. It doesnt quite mean no documents at all, and in fact, it can mean different things to different lenders.
When we got the loan on the house we are in now, for example, we didnt provide evidence of income. We didnt have jobs at the time. In fact, the lender made it clear that we shouldnt even mention what our reported income was. We did have a new business that was becoming very profitable in recent months. However, the previous years tax return would have shown an income too low to qualify us for a loan.
We qualified based on credit scores alone. Fortunately, both my wife and I have always paid everything on time and had good scores. We did have to provide information on when we started our business, and the usual appraisal of the home was required. So no doc doesnt really mean no documents, but rather limited documentation.
.: Pacific Sunset Mortgage - Mortgage Loans :.::
gets people into the most house of any type of no money down loans. These loans work well for someone moving to the area without a job yet, between
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Subprime Crimes From Wall Street to Brooklyn and Beyond - The Brooklyn Rail::
to the principal); no doc loans, made even though no documentation is given to But the Smiths refuse to leave their home without a fight.
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In fact, many such loans are referred to as no income verification loans. You might still have to verify that you have a job or a business, but without any evidence of how much income you make from it. Some loans may be referred to as partial documentation loans, or low documentation loans, and require some proof of income, but still be based primarily on credit score.
Bank of America eliminates all stated income loan types::
discover that a good number of so-called full doc loans were complete fabrications. Prime Loans and provided some Foreclosure Bail Outs, but no matter
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Testimony of Michael D. Calhoun Center for Responsible Lending [Adobe PDF] circumstances, foreclosures occur because a family experiences a job loss, Low doc and no doc loans originally were intended for use more hits from: http://www.responsiblelending.org/pdfs/commerce-testimony-final.pdf ::
circumstances, foreclosures occur because a family experiences a job loss, Low doc and no doc loans originally were intended for use
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Why No-Doc Loans?
At a time when the typical 30-year mortgage loan was charging 6% interest, our loan cost us 7.25%. That is typical of no-doc loans. They will always have a higher interest rate, because they are considered a higher risk by lenders. I know of at least one person who obtained a no-doc loan at 11% annual interest while normal rates were a little below 6%. That brings up the question of why you might want such a loan.
The Panic of 2007::
to value and show you had a job and could actually pay back the money. liar loans and no doc loans accounted for 47% of total loans issued last year.
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LendingTree® -- No-documentation mortgages::
Heres how no-doc loans work, and how to choose if its right for you. Buying a home with a low down payment. 11 questions to ask your mortgage lender
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The answer is a simple one - because you have no choice. In our own case we had money in the bank and a growing business, but the business had just started to really take off, so the previous year wasnt so profitable. We couldnt show income sufficient for any loan, but we had good credit scores. If we wanted to buy a house, we had to rely on those.
If you have a great job, but were unemployed the year before, you might face a similar situation. Also, getting a better job may seem great to you, but to a lender, if the job is too new and in another field than your previous job, you are a risk. You may have to rely on your credit score.
As you can imagine, when you get a no-doc loan, credit score matters. Our higher score meant 7.25%, which seemed high until compared with that 11% loan I saw. Keep in mind what is likely to happen in the future when looking at these loans. For example, if we were within a month or two of filing the next years tax return, we could have waited to buy a house and obtained a regular mortgage loan at 6%.
Of course, you can also look at a no-doc loan as a temporary solution. As soon as you have documented income from a business, or enough time on the job, or have otherwise corrected whatever the problem is, you can refinance. This certainly would be my goal if I had an 11% mortgage loan when 6% was available.
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No-doc Loans - Buying a House Without a Job