No Doc Mortgage

Mortgage documentation consists of a wide variety of information. Information on assets, income and employment must be provided and verified by a lender before a mortgage is approved. Verification can be direct verification of a borrower’s claim or a written confirmation from a relevant third party like a bank or tax returns. Documentation could act as collateral protecting the lender from possible loan defaults. It can also help to determine if a borrower meets certain lending requirements and criteria that can help lenders plan for appropriate payment modes. In general, if a borrower cannot provide full information or fully documented data of the expected requirements, he or she should seek the most restrictive method with which they can comply.

While most homebuyers have steady incomes and are willing to divulge their financial information for a mortgage loan, some buyers may have a problem. Lack of a steady paycheck, living off investments or living a life of crime may make some a bit apprehensive when divulging their personal information. Limited documentation mortgages are however available for these individuals. No doc or low doc mortgages are terms used to refer to mortgages that require a borrower to provide basic or no information at all on their tax returns, paperwork and profit-and-loss statements. No doc mortgages only require a borrower to provide a property appraisal and a credit report for them to be eligible. However, these flexibilities and privacy advantages come at a price for any borrower who goes for these types of mortgages. These mortgages carry higher interest rates and borrowers are required to make substantial down payments to gain good credit as compared to conventional mortgages.

No doc mortgages cost more and are usually the last option if a buyer, with the help of a good loan officer and a qualified mortgage banker cannot document the required information. According to one mortgage officer, most people who request for the no doc mortgage do not require one. No doc mortgages are of three main types: stated-income mortgages, no ratio loans and NINA mortgages. Stated-income mortgages are usually favored by irregular salaried people. These may be self-employed individuals or those who live off tips and commissions. No-ratio loans are right for wealthy individuals who live off investments, have complex financial lives, or who are faced with instabilities like divorce, death of a loved one or having a career change.

No Income No Asset verification (NINA) mortgages are especially favored by creditworthy people who want utmost privacy and who can afford to pay. These mortgages require the least documentation. In some cases, all that is required is the name of the borrower, the social security number, the down payment and the property address. No ratio and NINA mortgages differ on the credit score requirements. The higher the score, the less the demand there is for documentation. Lenders however will feel more comfortable working with a borrower who has been working on the same job for more than two years. In no doc mortgages, borrowers may pay up to 3 percentage points higher than documented mortgages. In any case, willingness to show asset ownership, credit scores and the degree of openness on the means of livelihood will determine if a borrower should go for a no doc mortgage or not.