In the past couple of years mortgage lending industry has gone through some major changes. You used to be able to walk into a bank and get a sub-prime mortgage loan with no money down. Given the recent sub-prime mortgage meltdown, those days are over. Lenders are less likely to give zero money down loans to people who have a bad credit rating. One particular type of loan that suffered by the stricter lending criteria were no doc mortgage loans.
Just like the name suggests, no documentation loans meant that people didn’t need to prove their income in the loan application. Because these loans were misused and abused by predatory lenders, they have been eliminated by a lot of lenders for the past couple of years. Before the mortgage crisis occurred, some lenders were offering no doc loans to people with bad credit ratings. This meant that the interest rates were extremely high and the borrowers eventually couldn’t continue to make the mortgage payments. Low doc loans are just recently becoming more available by a growing number of lenders.
When it comes to low documentation loans lenders look at one major area- the borrower’s credit rating. If your credit rating is bad then you probably shouldn’t apply for a no doc loan because most lenders will reject your loan application. Low doc loans are designed to give people with a good credit score the ability to simply state their income in the mortgage application. The higher the borrower’s credit score is, the less documentation that will be required for the low doc loan.
Low doc mortgage loans are perfect for people who are self-employed. It is difficult to come up with all of the documentation for loans when you are self-employed. No doc loans are designed to solve this problem by allowing borrower’s to state their income in the mortgage application. Another ratio that is very important when applying for no doc mortgage loans is the debt to income ratio. Lenders consider this ratio important in determining the borrower’s ability to repay the loan.
Because it is difficult to find no documentation mortgage lenders, you should start your search online. Using the internet you can look up different lenders that that offer no doc mortgage loans. By getting comprehensive quotes from multiple lenders, you can ensure that you get the best interest rate possible for you mortgage loan. Remember that saving a few interest points adds up to a lot of money when it comes to mortgages.
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