How No Doc Mortgage Loans Benefit the Self-Employed

No doc mortgage loans are home loans that require a minimal amount of documentation during the application process. When applying for traditional home loans, applicants must provide a slew of personal information, including income verification, employment history, tax documents, and assets. With no doc mortgage loans, however, applicants must only undergo a credit check and property appraisal. They are not required to provide proof of income or employment. This makes no doc mortgage loans a great option for the self-employed, who often do not receive regular or "traditional" payments.

The Application Process

If you are self-employed and/or do not have the type of income verification or tax documents needed to qualify for a traditional mortgage, a no doc mortgage loan is a great option. No doc mortgage applicants, however, must have an excellent credit score; lenders only offer no doc mortgage loans to individuals with high credit scores because they are taking a big risk by requiring such little initial documentation.

Lenders also require an appraisal of the home the applicant wishes to buy. Since no doc mortgage loans pose more risk for lenders, qualified applicants must also pay a much higher down payment than those with traditional mortgages.

Privacy Has a Price

Financial privacy comes at a cost. The more documentation you provide to the lender, the lower your loan interest rate will be. No doc mortgage loans are the most private of all, so they generally have a much higher interest rate than other loans. If financial privacy is important to you, or you simply don't have the type of income and employment verification needed to qualify for a traditional loan, the additional expense of no doc mortgage loans may be worth it.

"Low Doc" Mortgage Loans

There are two other types of mortgage loans that require less documentation than traditional loans. They, too, are good options for the self-employed or individuals who earn money in a non-traditional way. Since they require slightly more documentation than no doc mortgage loans, these low doc loans have lower interest rates and are overall less costly for the borrower.

  • No Ratio Mortgage - Applicants must state assets and employment for this type of low doc mortgage loan, but they do not have to state or document their income.
  • No Income Verification Mortgage - Applicants must state all assets, employment history, and income. You do not, however, have to provide documented income verification; a written statement of income is all you need.

To find out if no doc mortgage loans or low doc mortgage loans are right for you, contact your financial advisor or a trustworthy lender today.