No Doc Loan
No doc loans are actually mortgages that do not need documents. The documents usually needed are those for income verification and employment history, however, with a no doc loan these documents are not necessary. These loans are an excellent alternative for those that cannot produce the required paperwork for the traditional income loan. This is a big advantage for people who are unemployed, self employed or individual contractors. No doc mortgage loans can be used to buy or refinance single-family homes, condominiums, or townhouses. Such loans can also be used to purchase non-owner properties or rental properties. When they are used to purchase these properties where the owner does not occupy the property there are different guidelines that apply. These no doc home construction loans are at a lower interest rate than a regular no doc loan. They also need either a down payment or equity if refinancing.
In addition to not requiring paperwork, no doc home loans also do not require assets. A no doc loan can be approved based solely on the strength of the borrower’s credit history and either the down payment or the equity from a property. However, the credit history and current credit score are also key decision factors when applying for no doc loans since underwriters have very limited information about the applicant. Normally, for a no doc loan, credit scores above 660 would be required. However, sometimes most subprime lenders give no doc personal loans for those with lower scores. Then again, when the subprime industry needs to tighten up, no doc loan programs are the first to be eliminated because of the normal risk involved.
The biggest drawback to no doc loans is their very high interest rates. These interest rates can be as high as 2.5%. In spite of the high interest rate, no doc personal loans are the best way to go for individuals who may have changed careers, have a hard time proving their income, are seasonal workers or are financially comfortable and do not wish to prove their income. Keep in mind though, that no doc home loans are not a way to purchase property that you wouldn’t normally qualify for. No matter how seductive they may seem, given the fact that almost anyone can be approved for one, you should remember that they are not right for everyone. As a general rule, I would recommend trying to figure out a way to apply for a traditional home loan prior to pursuing one of those.
Furthermore, even though an individual might have perfect credit, the lender will usually charge a higher rate of interest than when compared to loans that require full documentation of all income and assets. So, if you do have perfect credit, you should consider your options more carefully. As a last note, I highly recommend for you to find out exactly what type no doc loan you qualify for, and apply to you, before applying to any bank or financial institution.
