No Document Loans and No Tax Returns

Life isn’t one size fits all, and mortgages shouldn’t be either. No-Doc mortgage loans were created for borrowers with nontraditional income sources and have been denied by many lenders, simply because of the lack of paperwork. But are they still available? Yes, they are.

What are No Doc Mortgages?

No doc loans, short for no documentation loans, are mortgages that require little to no paperwork to qualify. Lenders don’t have to consider tax documents like W2s or tax returns but can accept bank statements as a sufficient form of proof of income. Also called no income verification loans, these mortgages are a great resource for self-employed borrowers. These loans can be used for a home refinance, to buy investment properties, or serve as a mortgage for an owner-occupied home as well.

How is a No Doc Mortgage different from a traditional mortgage?

Outside of both having the same advantage of securing a home loan, No Doc mortgages have a few key differences from a typical conventional loan. While the loan process doesn’t require stacks of paperwork, the borrowers’ credit score and down payment requirements are typically higher than a conventional mortgage. For example, to qualify for many No Doc type loans, borrowers need to have a minimum credit score between 620-680. This loan program also requires a down payment or equity of at least 10- 25% of the home’s value depending on the credit worthiness of the overall file.

Why aren’t No Doc mortgages still popular?

Previously, lenders would extend mortgages to borrowers who didn’t prove they were financially fit to repay the loan, which eventually led to the financial crisis of 2008. During this dark time, subprime homeowners weren’t able to make their mortgage payments because they either weren’t even employed, or they had seriously over stated their income when obtaining a No Doc Mortgage. Due to this, federal regulations like the Dodd-Frank Act were put in place to make sure a similar crisis never happens again, thus ending the long period of No Doc mortgages. Fortunately, only 3% of lenders are still allowed to provide low-doc or no-doc mortgages in efforts to serve those who have been economically excluded from homeownership. There are different types of loans like No Ratio, Lite Doc, and Asset Utilization loans for borrowers with good credit history.

Are there disadvantages to a No Doc Mortgage?

When it comes to No Doc mortgages, there can be a few drawbacks for some customers. For instance, these types of loans aren’t offered by all lenders. It might be hard finding a lender that offers no-doc or low-doc mortgages because of the financial undertaking and risks associated. Additionally, lenders might call one of their products a “no-doc” loan if it has less strict requirements but doesn’t quite fit the bill to be an official “No Documentation” mortgage by still requiring stated income. Lastly, No Doc Mortgages require the borrower to be upstanding in other areas of qualification, such as credit history and having the cash flow for down payments, closing costs, and reserves.

What type of home buyers could No Doc Mortgages be good for?

Fortunately, there are a lot of potential homeowners that No Doc or Low Doc mortgages may be the right solution for. As we have access to lenders that cover all 50 states, these loans are a great solution for those who have been turned away by other lenders. These mortgage programs are perfect for borrowers who are:

• Retired
• Real estate investors with complex income who deserve a simplified underwriting process.
• Immigrants, minorities, and foreign nationals sharing or pooling extended family resources.
• Borrowers who are self-employed, work off commission or tips
• Independent contractors with difficult-to-document income sources.
• Recently self-employed business owners without a full year of income statements
• 1099 workers

How can I apply for a no income verification mortgage?

If one of these potential homeowner situations sounds like you and you want to learn more, please submit an inquiry and we will connect you with an appropriate lending solution. Submit your inquiry no to speak to a mortgage specialist today.

I’m ready to start the application process. Now what?

That’s great! Don’t let the fear of tax documentation, income verification or any other mortgage myth hold you back. Take the first step in the application process and see if you can pre-qualify for a home loan by asking to be connected with a licensed loan officer. Just click apply now and you will be on the road to success today.