Low Doc Loans
Sometimes people who are trying to get a home loan have problems
proving their income. This might be because they recently started
working for themselves and don’t have the tax documents yet to prove
their income. There are other reasons this could happen, too, but one
solution for this is called a ‘low doc loan’, or ‘low doc home loan’.
The name makes sense once you understand that a low doc home loan is
one that requires little to no income documentation or verification.
Quite often income is verified by showing bank deposit slips, or maybe
be an employer who pays you on a cash basis because you are an
independent contractor.
Low doc loans are also good options for those on the rebound from credit
issues and have been rejected by conventional home loan companies. Of
course, loans of this type usually bear a higher interest rate because
they cater to higher risk potential home owners.
Low document home loans come in three forms: no ratio loans, no doc
loans and stated income loans.
No Ratio Loan
A no ratio loan is usually good for those with good credit, but
proving the incoming might be too time consuming and complex, so the
loan company will simply give the loan based on the mortgage borrower’s
good credit rating. No ratio means there is no debt to income check
because it is apparent the borrower is able to maintain their debt.
Stated Income Loans
Stated-Income (Low Doc) Loans are good for borrowers who do not have
a consistent income. Some self-employed people have seasonal incomes
that vary quite a bit from month to month or season to season. You will
have to prove disclose your earnings on this type of a loan, however,
but it’s usually not as complex as a traditional loan. It usually
requires tax returns if you have them, or banks statements if not.
No Doc Loans
No Doc Loans are not to be confused with not ration loans nor stated
income loans. These are the easiest loans because you do not have to
show any, or at least only very little income documentation. The lender
will consider the loan request with the minimal amount of financial
information from the borrower and the loan is kept private with no
disclosure to any other sources. |
