A Clever Guide to Mortgage Loans with No Documentation Needed

A Clever Guide to Mortgage Loans with No Documentation Needed- 150x150Similar to low documentation loans, a no documentation loan is a type of mortgage loan that requires very few documents in order for the loan to be granted. You essentially just need to sign an affordability statement which states that you are aware of how much you will have to pay back and that you can afford to pay back the loan. You won’t have to provide proof of income when taking out a mortgage loan with no documentation needed.

Unlike conventional mortgage loans which require a 10 to 20 percent down payment, no documentation mortgages require a 5 to 30 percent down payment, depending on what your credit score is. Home buyers with less than perfect credit score also have the option of taking out a no documentation mortgage through the Federal Housing administration (FHA), which insures mortgage loans against default.

Because no documentation loans don’t take long to be approved since there is little that your lender has to verify, and since they require so little paperwork to prove your income, these are typically mortgage loans for self-employed or for those with bad credit history.

How Can You Qualify for a No Documentation Mortgage?

Many people believe that someone who is looking for a no documentation loan must have something to hide, but that is rarely the case. This type of loan is preferred by people who are self-employed and can’t provide the proof of income for lender requirements in order to give out a conventional loan, people who are unemployed and can’t meet the requirements for a traditional mortgage loan, and people with a poor debt to income ration, but who can afford to pay back a mortgage loan without difficulty. It is true that someone who makes money from illegal activities can take advantage of this type of loan, but it is not why this loan was designed. It is estimated that approximately 20 percent of all borrowers have chosen this type of loan instead of a conventional one.

Even though this loan is described as a no documentation loan, there are still a few documents that you will have to provide for your lender. The lender will still have to see a credit report in order to determine how big of a default risk you are. Also, the property that you wish to buy will need a home appraisal so that your lender can determine if the money that you are borrowing actually represents the value of the home.

You could obtain a mortgage loan even without those documents, but the loan will probably be much more expensive. You should also keep in mind that this type of loan is only valid for the purchase of a single family home, town house, or apartment. Commercial property and manufactured homes can’t be purchased with a no documentation loan.

Another thing to remember about no documentation loans is that they typically require a higher down payment than conventional loans, and also come with higher interest rates and closing costs. Your credit also has to be in good standing, or the loan will be much more expensive and your mortgage application can also be denied.

Mortgage loans that have no documentation requirements are a good alternative for home buyers who don’t qualify for conventional loans, or for those who wish to take out a mortgage loan without providing too much info about their income. Before deciding to go with a no documentation mortgage loan, you should do a little research and find out if you can meet the requirements of a conventional loan, which can be cheaper and provide greater benefits.

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