What are No-Doc Loans?

December 9, 2021

Borrowers looking to get approved for a mortgage and cannot show income verification are perfect candidates for no-doc loans. This type of mortgage loan does not require tax returns or income verification.

To qualify for a no-doc mortgage loan, borrowers have to show adequate credit history, real estate investment experience, and liquid assets, which are all passed through underwriting.

No-doc loans are typically unregulated, so they involve elevated down payments over traditional mortgages. In addition to requiring a higher down payment, no-doc loans generally have higher interest rates as well.

For standard mortgages, borrowers are required to submit proof of income to qualify for a loan. Lenders determine this proof via W2s, pay stubs, employment letters, and/or recent tax returns. Borrowers should be able to prove they can afford loan payments through their source(s) of income. Down payments and credit scores are also relevant.

With no-doc loans, the paperwork load is significantly lighter. All the borrower needs to do is provide a declaration saying they can repay the loan. Generally, those who are self-employed, investment-wealth capitalists, immigrants, real estate agents, or temporary workers apply for these loans.

The Consumer Financial Protection Bureau (CFPB), a regulatory agency established by Dodd-Frank, says, “Your organization must verify the information you rely on using reasonably reliable third-party records. You generally cannot rely on what consumers orally tell you about their income.”

No-doc loan borrowers should have excellent credit scores and high cash reserves for down payments. Down payments are roughly 30 to 50 percent higher than traditional mortgages. The higher the down payment, the easier the borrower can be approved for a loan.

Using bank statements and other paperwork, the borrower can prove their capacity to the lender and qualify for a no-doc loan.

Do you need a no-doc loan? Contact the mortgage experts at EB Mortgage today!

EB Mortgage is a locally-owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us at 866-246-0516 or e-mail contact@ebwmtg.com today.

Written by the digital marketing staff at Creative Programs & Systems: www.cpsmi.com.