No-doc loans, also known as no income verification mortgages and stated-income mortgages, allow applicants to qualify for a loan using non-standard income documentation. Most mortgage lenders will ask for tax returns as part of their consideration. With no-doc loans, other financial factors will be considered, such as home equity and overall cash flow.
This type of loan qualification makes it easier to get a home if you’re self-employed or rely on non-traditional commissions or payment.
What Is a No-Doc Loan?
With no-income verification mortgages, lenders will not require you to prove or document a source of income. Some other names for these mortgages include stated-income loans, no-doc loans, and hard money loans, but they all fall under the same umbrella definition with only a few differences.
Stated Income, Stated Assets
Also known as a SISA loan, this type of loan can be useful if you have significant income and assets that aren’t easy to document. When you apply, the lender agrees to accept the income and asset numbers you provide, with no additional documentation needed.
A SISA loan can be helpful for small business owners who keep their assets in a business account and don’t document any personal compensation with pay stubs, W-2 forms, or 1099 forms. In these situations, bank statements for 12 to 24 months can be used to calculate your business’ monthly cash flow.
Stated Income, Verified Assets
If a large part of your income is hard to document, but you have verifiable assets on hand, then a SIVA loan may be for you. The lender agrees to accept your income figure and verify the assets you have available.
This is useful for individuals with income that is based on tips or gratuities and with a personal bank account in their own name. It is your personal bank information that’s used to verify your assets.
No Income, Verified Assets
A NIVA loan is meant for applicants who have verifiable assets, but their income can’t be documented. In situations like this, the lender verifies your assets and does not take your monthly income into consideration. A perfect example of a NIVA loan candidate is a retired person who draws income from retirement accounts and does not have enough verifiable income, but their assets can be documented.
No Income, No Assets
NINA loans have the fewest requirements of all and are best for those who cannot provide documents for either income or assets. NINA loan approval is based entirely on the collateral and other non-income factors that the applicant has in their favor. Someone who is employed by a foreign company or holds their assets in a foreign bank may not be able to provide acceptable documents to US lenders.
Someone in the above scenario could use a NINA loan to avoid document translation and international asset transfers.
What are the Benefits of No-Doc Loans?
Whether referred to as no-doc loans, hard money loans, or stated-income loans, the benefits of obtaining such a mortgage are clear.
1. No-Doc Loans Can Be Approved Quickly
One of the biggest advantages of using one of these alternative loan methods is the speed at which loan approval and loan funding can take place. In some cases, the approval for one of these loans can take as little as a single day, though this will depend on the type and amount of assets the applicant has available.
Lenders typically consider the property, the amount of down payment or equity the borrower will have in the property, any experience the borrower has (if applicable), the exit strategy for the property, and will ensure the borrower has cash reserves available in order to make monthly loan payments.
2. Loans Can Be Funded Fast
Traditional bank loans can take as much as a month or more to be funded. This is all well and good if you’re not in a rush, but for investors, timing can be everything. Hard money loans can be funded much faster than traditional bank loans, with funding sometimes being received in as few as 3 to 5 days.
Funding that arrives in such a short amount of time can be used to save deals that got stuck in escrow when the original lender pulled out or is taking too long.
3. Fewer Requirements
As described above, these types of loans have fewer requirements, particularly when you compare them to traditional bank loans. The requirements include sufficient equity in the property, enough cash on hand to make monthly payments, a reasonable exit strategy, and, if necessary, ample experience.
4. Fewer Red Flags
Banks also tend to employ a list of “red flag” issues that will prevent them from considering lending to you. These include things like recent foreclosures, short sales, loan modifications, and bankruptcies. Bad credit can also prevent a bank from lending to you.
Additionally, most banks will not lend to a borrower who already has 4 mortgages even if the borrower’s credit is perfect, making it difficult for real estate investors to work with them beyond a certain point.
Real estate investors who have one or more of these “red flag” issues on their record can still qualify for one or more no-doc loans—as long as you have enough capital for the required down payment or equity (usually 25% to 30%) in the property.
The equity serves as the security for the loan that ensures the borrower will make the agreed-upon monthly payments and the balloon payment that usually comes at the end of the loan term.
5. Find Capital for Hard-to-Fund Projects
Hard money lenders and providers of no-doc loans will work with individuals that conventional lenders have no interest in financing. A good example of someone in this position is a real estate investor interested in a fix and flip loan.
Fix and flip loans involve a real estate investor purchasing a property with a short-term loan. The investor then quickly makes the needed repairs, updates, and sells the property. In most cases like this, the investor only needs a 12-month loan – a term that doesn’t work with a traditional bank’s business model. Banks want to lend money on the long term, not the short term.
6. The Property Itself May Not Qualify for a Traditional Bank Loan
Sometimes, issues with the property itself may preclude it from financing via traditional mortgage methods. The issues could be related to the foundation, electrical wiring, or plumbing and could cause a bank to consider the property uninhabitable and, therefore, unable to be funded.
Banks are extremely careful about avoiding risk when it comes to approving borrowers. They are, therefore, often unable to consider a loan that is outside their very strict criteria. With no-doc loans and hard money lenders, it’s possible to finance the purchase of a property that has issues preventing it from qualifying for a traditional mortgage loan from a bank.
7. Self-Employed Workers Have Trouble with Traditional Mortgages
Generally speaking, banks are often unwilling to provide home loans to borrowers who are self-employed or, for whatever reason, do not meet the required 2 years of employment history at their current position. Even if a borrower is ideal in every other financial aspect, these two factors can quickly torpedo any dreams of getting a traditional bank mortgage.
People in situations like this can use no-doc loans with a short term (anywhere from 1 to 3 years) to enable them to purchase the property. The borrower who does not have sufficient employment history can then refinance out of the no-doc loan and into a low-cost conventional loan when they obtain the necessary 2-year requirement.
Why Work with As Is Loans?
At AS Is Loans, we work with over 6000 lenders and can lend money to individuals in all kinds of situations. You can use the loan we help you receive to finance your business, properties, inventory, purchases, renovations, or anything else that has to do with business. We lend worldwide, meaning that no matter where you’re located, we can lend in any country. Thanks to our 30 years of experience in the lending industry, we can secure loans that other funding companies can’t, and we close faster than traditional financing.
At AS-IS Loans, we’ll work with you no matter what your situation. If you’re self-employed and having trouble obtaining a traditional mortgage, we can help get you the funding you need at a rate that’s affordable. If, for any other reason you require a no-doc, hard money loan to achieve your success, we’re here for you. Call us today at 800-611-2747 to speak with a loan advisor about your options. You have more than you think.