No Doc Mortgage Loans
Applying for a mortgage loan is never an easy task. Your mortgage lender will require a mountain of paperwork. And it’s your job to find it all. However, you can avoid this hassle by applying for no doc loans, or more specifically no doc mortgage loans.
As their name suggests, no doc loans don’t require borrowers to show any paperwork to lenders. This means that you won’t have to provide paycheck stubs, tax forms, bank account statements and statements from your retirement accounts and other investments. Instead, you simply have to state your annual income, savings, debts and the dollar amount of your investments in order to apply for no doc mortgage loans. Lenders, instead of backing this information up with documentation, trust that you are telling the truth.
These no doc mortgage loans are perfect for borrowers who are too busy to search for the large volumes of documents that are usually required to close a mortgage loan. They are also appropriate for workers who are self-employed or who work on a freelance basis. These people are often paid sporadically, receiving huge paychecks one month and tiny ones the next. It’s often difficult for these workers to prove that they do have yearly incomes that can support large mortgage loan payments.
Before you rush out to take out one of these no doc loans, though, it’s important to understand that there are some negatives associated with them. Mortgage lenders rightly view no doc mortgage loans as being more risky than conventional 30-year or 15-year fixed-rate mortgages. Remember, they are lending money to borrowers with no real proof that these borrowers can pay it back.
Because of this, lenders typically charge higher fees and mortgage interest rates to help cover this risk. Interest rates today on 30-year and 15-year fixed-rate mortgages are at historic lows. But you won’t get these rates if you’re taking out a no doc loan.
It’s also more difficult to find mortgage lenders today who are willing to give out no doc loans. Again, this is because no doc home loans are rather risky. More lenders were willing to take on this risk during the housing boom years, a period that lasted from about 2001 through the first half of 2006. During these years, homes sold quickly, often for prices higher than what sellers originally asked. Sellers could move their homes before even officially listing them on the market. And real estate and mortgage-lending companies thrived.
Those days are long gone unfortunately. Today, home values have plummeted. Many houses are sitting on the market for months, even years, without attracting reasonable offers. And many, many mortgage-lending companies have gone out of business. The few companies that still remain will most likely take a small risk on no doc mortgage loans!
Mortgage lenders are far more averse to risk in these trying economic times than they were even two years ago. If you think no doc loans are right for you, you’ll have to be more persistent than ever to convince local mortgage lenders that you’re not a serious foreclosure risk.
