No Doc or Low Doc Home Loans – An Easier Option?
What are No Doc or Low Doc Home Loans? These are the type of loans that do not require documentation or require only a few documentation from the borrower.
How do they work?
It is typical for lending companies to require their borrowers to submit the necessary documentation as basis for the approval of their loans. These documentations will show the employment history, credit history and income status of an individual. For those who can prove that they have a stable job, a solid savings account, and a good credit history, lending companies will most likely be willing to give lower interest rates for their loan since they will be seen as low risk borrowers.
However, some people wish to keep their personal details private. They prefer not to submit any documentation that will give away details about their personal life. Thus, they opt to apply for No Doc or Low Doc Home Loans. Since these types of loans don’t require any documentation, they are technically easier to obtain. However, lenders who offer No Doc Loans and Low Doc Loans charge for higher interest rates.
With a No Doc or Low Doc Home Loan, all the borrower needs is to give his name and social security number to the lender together with some details about the home property he wish to purchase. And that’s it. No need to submit documents. Lenders that offer No Doc or Low Doc Home Loans have higher interest rates. Then again, some people prefer to pay for higher interest rates than to submit personal documentations to their lender.
There are three types of No Doc Home Loans or Low Doc Home Loans and these are the following:
No Doc Loans
No Doc loans are for home buyers who have a good credit rating to back them up. Lenders do not care to see any more documentation rather than the buyer’s social security number and some general information about the buyer’s properties.
Stated-Income (Low Doc) Loans
With this type of loan, the borrower has to declare his earnings, show bank statements and income tax returns of his earnings for at least a two-year period. However, the borrower does not have to be a regular employee of a company in order to be approved. Stated-income loans are ideal for those who do not have a regular job or those who work on commission basis.
No Ratio Loans
No Ratio home loans do not require a borrower to declare his income. However, the lender will ensure that the borrower have assets or properties on his account and that the borrower has good credit.
If you’re looking for ease and you would like to protect your privacy, then a No Doc or Low Doc home loan is worth considering. Although these types of loans generally have higher interest rates, you can still look for the lender who offers the least rate among other No Doc or Low Doc lenders. Even if it’s only a 0.25% difference, it can still save you thousands of dollars for the entire loan. So don’t forget to shop around for the lender who will give you the best deal.
