Having your own business is a dream come true for may people. But it can sometimes cause trouble when you need to show proof of your income. But if your income doesnt’t come from a paycheck or you don’t want to reveal personal things to a lender, you can still get a home loan.
It will cost a bit more than if you could provide proper documentation but to some that is a small price to pay for privacy. Many buyers choose not to offer documentation and willingly opt for a higher interest rate . Many of these home-buyers have a great income, a savings account in good standing and a good credit history but don’t draw a steady paycheck from a boss. They may own businesses, draw commissions, live off investments or get their income in cash. Others don’t want to give up their financial privacy. Limited-documentation mortgages are available in these situations.
No Doc (documentation) or Low Doc loans attract home-buyers who are willing to pay a premium for their privacy. As for privacy, there are buyers who don’t care to have their entire life and financial history presented to the lender. They might be using an inheritance to secure a loan or have fluctuating income from owning their own business.
Another swaying factor is ease. With a No Doc loan, the borrower provides their name and social security number, along with information regarding the property being purchased. The rest is up to the lender.
There are three types of No Doc & Low Doc Loans
No Doc Loans
No Doc loans require the least documentation and are for buyers with good credit.
Stated-Income (Low Doc) Loans
Stated-Income, or Low Doc loans, attract people who work on a cash or commission basis – people who don’t draw a regular salary.
No Ratio Loans
No Ratio loans are for borrowers who do not wish to disclose their income, therefore there is no debt-to-income ratio for the lender to consider. The No Ratio borrower has good credit and abundant assets that make up for the lender not considering the borrower’s income information. This loan can be a quick and easy process for borrowers who will have a ton of trouble getting documentation.
If you think a No Doc or Low Doc loan is right for your situation, talk to a mortgage expert. It might be beneficial for you to pay a higher rate for this loan. A good mortgage banker can also show you how to obtain the necessary documentation.