What Is A No Doc Or Low Doc Home Loan?
A "Lo Doc" (sometimes called "reduced document loans”) are mortgage or home loans where documentation for verification of your income is not required. However, all other documentation may be.
These loans are ideally suited to self-employed, independent contractors, investors, credit rating impaired, ex-bankrupt or clients with arrears on current mortgages. Also, borrowers who have been rejected by traditional lenders may benefit from these reduced document loans. Including people with suitable incomes but to meet bank verification takes valuable times and money.
One thing to be aware of is that Low Doc Home Loans are usually slightly more expensive than traditional loans due to the higher risk profile. But finding the right mortgage broker can minimize these costs.
This is primarily for people who are looking to purchase investment properties, residential homes or to refinance an existing property and don't have pay stubs or current tax returns confirming their income, which normally sustains a standard investment loan.
There Are 3 Main Types of Reduced Document Loans.
No Ratio Loans
These loans are for lenders who may not wish to disclose their incomes, Thus there is no debt to income ratios for the lender to consider. If gathering income documentation's is going to be a logistical nightmare, then this loan can offer a quick and easy process.
No Doc Loans
The No Doc loans require the least amount of documentation. The lender evaluates your loan request with the minimal amount of financial information from the lender and maximum privacy is assured.
Stated-Income (Low Doc) Loans
If your income fluctuates week to week, month to month, Stated-Income are the most attractive. However, unlike the No Doc Loans, the Stated Income Loan does require the lender to disclose earnings, usually for two years, and might need to show tax returns and bank statements.
If you think a No Doc, or stated income loan is right for your situation, talk to a mortgage expert like Brandon Moss of The Moss Team. It might be beneficial for you to receive this type of loan. A good mortgage broker can also show you how to obtain the necessary documentation.