The most common reason that a consumer would want to utilize a No Doc Mortgage is financial privacy. Of course, this privacy comes at a premium. The name No Doc Mortgage is often misleading to consumers who have not adequately researched this mortgage program. Paperwork and documentation will be required by any lender who is going to lend money to a consumer. At the very least, there will be a credit report and property appraisal involved. Depending on the amount of documentation required by the lender or offered by the consumer, the interest rate and loan fees will vary. The interest rate and fees will be significantly more than what can be expected with a traditional mortgage program or lender. In addition to these issues, borrowers hoping for a No Doc mortgage must have an excellent credit history in order for the lender to even consider this type of loan offer. There are three different types of No Doc Mortgages that can be considered by consumers.
No Income/No Asset Loans
This is the most popular type of No Doc Mortgage, however it is also the hardest to obtain and the most expensive. In the past, consumers have used this type of loan to purchase properties that were out of their price range. Lenders have become more stringent with requirements in these mortgage programs over the past few years as a result of lender reform laws.
No Ratio Loans
A No Ration Loan is a program where the lender does not ask for an asset to debt ratio prior to approving a consumers application for a mortgage. Less expensive than a No Income or Asset Loan, these programs enable consumers who are retired or living off of their investments to purchase property that they might otherwise be unable to attain.
Stated Income Loans
A stated income is for people who are not traditionally employed. This includes retirees, but it is a common program for those who are self employed or for those who earn strictly commission. Proof of income in the form of bank statements, receipts, etc. will be required. The lender cannot simply take the borrower’s stated income and offer a loan.