Due to the recent mortgage crisis, no documented loans have taken a major beating from the market. Due to poor lending practices, many people were approved for no doc loans even though they weren’t qualified for the loan. As a result, there were a large number of people that defaulted on their mortgage loans. These loans have been labeled “liar loans” because borrowers tended to overstate their income in the lending application. Only in the recent months are no doc loans once again becoming available to consumers.
Also known as stated income loans, no doc loans are typically used by people who are self-employed. These people tend to have a traditionally difficult time getting loan applications approved because of loan income requirements. Low doc loans were designed to help people with good credit to get their loan approved. These loans are very useful for people who are looking to get a loan without the difficulties of having to prove their income.
Although lenders allow you to state your income, they do require other documentation to ensure that you aren’t overstating your income. You need to have the past couple years worth of tax returns and also recent bank statements. Lenders have increased the criterion for approving these low document loans because of the recent housing crisis that has occurred. No longer can you simply walk into a bank and get a no doc loan approved. You need to have a good credit rating when it comes to getting your loan approved.
If you are looking to apply for a no doc loan, you should be aware that lenders will critique your past credit history quite vigorously. Any previous missed loan payments or default that you have will not go unnoticed by lenders who are offering these loans. Because lenders that offer these stated income loans bear a greater risk when approving the loan, no doc loans usually have a higher interest rate than traditional loans.
When you are going to look for a no doc loan lender, you should use the internet to find the different lenders available that offer these loans. Because these loans are not offered by every lender, you will need to look through a few different lenders before you find one that works for you. Be sure to get comprehensive quotes from different lenders to ensure that you get the best interest rate on your loan.
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