The purpose of no doc loans is to assist individuals in acquiring property even though they do not have a regular source of income. People who have good credit and no money can purchase investment property with no money down. Banks were known for handing out these types of loans several years ago and when the housing market starting experiencing a down spiral they tighten their belts and their wallets by handing out on a small number of doc loans.
Individuals could practically walk into a bank and apply for one of these loans without providing any proof of income. These loans are referred to as NINA or no income and no asset verification. Some people jokingly refer to them as Drug Dealer Loans because of the ease of acquiring them. The interest rate on the loans is higher that the average loan and the amount the bank lends depend on the lenders preference and the value of the credit score.
Here are some requirements for receiving no doc loans:
- A full appraisal amount
- Credit score
- Title commitment
- Warranty information or renters insurance
There are several types of loans available they are:
1. No doc –this kind of loan requires little to no documentation depending on the value of the credit score. High profilers apply for these loans such as doctors, lawyers, actors and well known citizens.
2. No ratio- this type of loan is meant for people with good credit and a fairly decent income. This includes retirees, people who are facing life changes such as divorce or loss of a spouse.
3. Stated income mortgages- these loans are for people who are self employed or who do not have a steady source of income.
Individuals who fall into one of these categories can apply for one of these loans. If they are looking to finance a house for the first time or looking to acquire a second mortgage any one of these loans will do. Lenders are normally generous in providing loans to people who show some promise in making their payments. Hundreds of individuals will qualify for a mortgage whether they have bad credit or not.
The majority of these loans are for people who have special needs. They choose not to or do not have any income documentation to present to their lenders such as bank statement, brokerage summaries or tax reports. Depending on the customers and the circumstances some borrowers can get away with supplying only their income level. Other customers may not be required to put down any money and even better they do not have to divulge any information that deems to be private such as the amount of their income and how it is obtained.
It seems that the more secrecy that is involved in obtaining the no documentation loans the higher the interest rates will be. For individuals who chooses not to disclose any personal information they are looking at paying more for the amount of money they need to borrow.