 With
No Doc loans
little or no
documentation is
provided to
substantiate the
borrower's income
and assets.
These loans are
mostly for
self-employed
borrowers who have
difficulty verifying
all of their income,
and for service
industry employees,
such as bartenders,
waiters, and hair
stylists that have
pay which is
difficult to
determine precisely.
These loans may be
also used by
borrowers who get
most of their income
from commissions, or
by borrowers with
very complex income
structures. For
example, a borrower
who has income
primarily from
rental properties
and investments may
be hesitant to
verify all sources
of income due to the
volumes of paperwork
this would require.
Because of the risk
associated with No
Doc loans, a
borrower may have to
make a larger down
payment. In many
cases, the LTV on a
No Doc loan is
limited to 70 -75%.
Some lenders,
however, will allow
a 90% LTV.
Credit standards are
generally a little
higher for No Doc
loans. Borrowers
must have maintained
a good repayment
history within the
last two years.
Additionally, some
lenders will require
borrowers to
maintain higher bank
balances than
typical applicants
usually must have.
Lenders will assess
higher interest
rates and fees on
loans when little or
no documentation is
provided to
substantiate the
borrower's income.
Expect the interest
rate to be about
one-half to one
percent more than
the rates on a fully
documented loan.
Consequently, No Doc
loans should only be
used when necessary,
not simply to avoid
the paperwork
requirements of a
Full Documentation
loan.
No Doc loans could
be classified into
"Stated Income",
"Stated Assets", "No
Income Verification
(NIV)", "No Income /
No Asset (NINA)",
"No Ratio", etc.
With "Stated Income"
loan, the borrower
can simply state his
income on the
application, and do
not have to provide
any documentation to
substantiate this
stated income.
Lenders usually
verify that the
borrower has assets
that logically match
the stated income.
With "No Income / No
Asset" loan no
income and no assets
are verified.
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