No Doc Loans: Evaluating the Qualifications

No doc loans require less paperwork and documentation during the application process than regular loans. With no doc loans, applicants do not have to divulge such personal information as employment history and status, income verification, and assets. Due to the limited information and verification afforded by the applicant, no doc loans are risky for lenders; therefore, they don't give them out to just anyone. Although applicants must submit less documentation with no doc loans, they'll still need to meet certain qualifications to be approved.

Candidacy

First, a lender will assess your candidacy. No doc loans have higher interest rates than traditional loans because they require such little documentation and protection for the lender. If your lender thinks another type of loan will better suit your needs or budget, they may recommend a low doc or traditional loan. With low doc loans, applicants must state employment and assets, but do not have to provide income verification.

No doc loans are generally reserved for individuals with non-traditional means of employment or income. For example, many self-employed individuals do not have the regular income verification or necessary tax documents needed to qualify for a traditional loan. (Regular loans require a lot of paperwork and personal information, and individuals who have seasonal or other non-traditional jobs may have a difficult time applying for such loans.) If you fall into this category, lenders will consider you to be a good candidate for a no doc loan.

Credit Score

Next, the lender will assess one of the few qualifications needed for no doc loans: your credit score. Only individuals with excellent credit histories can qualify. Generally, your credit score will need to be between 720 and 900 to qualify for no doc loans. This helps lenders protect themselves by weeding out risky borrowers.

Appraisal & Down Payment

The other main qualification for no doc loans is how much money the applicant is able to initially put down on their home. The lender will require an appraisal of your home in order to determine the percent you'll be able to pay as a down payment. These loans require significantly larger down payments than traditional loans because they pose so much risk for the lender.

Equity

For no doc loan applicants who are simply re-financing their loan, they will need to show plenty of equity in their home in order to qualify.

No Doc Loan Benefits

No doc loans have plenty of benefits, including financial privacy and a quick, easy application process involving little paperwork. If you can afford the high interest rates and steep down payments associated with no doc loans, discuss your options with a trustworthy lender.

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