For more than a decade, if you wanted to buy real estate, you had to have verified income. But finally, the restrictions have eased, and no documentation home loans are an option again. While a traditional loan is an option for most would-be homebuyers, there are certain situations when a no doc loan makes more sense.
What Is a No Documentation Loan?
This type of home loan generally requires no verification of your employment, income, or assets. It is a great fit for investors who have cash reserves, but who don’t want to wait for the lender to go through every detail of their finances. You simply qualify based on your credit history if you have at least a good to average credit score.
You may recall that NINJA or No Income, Job or Asset verification loans were popular in the early 2000s, but the mortgage crash eliminated them. Today’s loans are not as easy to get. You can trust the professionals at As-Is Loans to find a mortgage program that’s right for you. We work with more than 6,000 lending partners who can help you no matter your situation. We can review the situation and go over the options available to you.
Reasons to Consider a No Doc Loan
Real estate buyers look to no documentation loans for a variety of reasons. The biggest benefit is that the loan gives you buying power without having to go through the hassle of verifying your finances.
1. Interest Rates Are Low
Although the Federal Reserve slightly raised interest rates in the past few years, it is considering cutting rates again. There is a good chance that the rates will continue to be at historic lows, around 4 percent. Even with a premium on the loan, your loan would be around 6 percent.
2. You Are Self-Employed
If you are among the millions of self-employed people who are making a good living working, a no doc loan could help you qualify for a loan based on your bank statements, not your pay stubs. A lender can assess whether your cash flow can support paying the mortgage loan. You’ll also need to show a profit and loss statement that aligns with the bank statements.
3. You Lack Tax Documents
If you claim enough tax write-offs so that your taxable income is low or your income is cash-based, and you lack w-2s, a no documentation loan could be the answer.
4. You Value Privacy
If you prefer not to divulge every detail of your finances to your lender, then this loan is a good fit.
5. You Are Retired
Retirement can reduce your income even if you have significant assets. A no document loan can get you into your dream home.
There are a few more things to keep in mind if you choose to go with a no doc loan.
It can be tempting to fudge your numbers so you can get into that beautiful home you’ve been dreaming of. But don’t do it. Be honest about how much income you earn at the time you apply for the loan. Don’t factor in what your finances might be in a few years or that big deal that will close in six months. Borrowing more than you can afford is a formula for foreclosure. Make sure you include homeownership costs such as insurance, taxes, and maintenance.
Even though the lender is not going to verify your income, this doesn’t give you license to lie. When you sign the mortgage documents, you are saying that all information is true.
You’ll Pay More Interest
As we mentioned, these loans come with a higher interest rate. But at As-Is Loans, we offer some of the most competitive rates. Homeownership is a financial investment. Even if the loan has a slightly higher interest rate, homeownership beats renting. For those of you who remember the 1980s, when interest rates were 10-12 percent or higher, 6 percent is still a low rate.
You’ll Need a Good Credit Score and Down Payment
Gone are the days of true NINJA loans, which could be secured with no down payment and no credit requirements. This new generation of no-documentation loans requires your credit score should be solid, at least 700 or more. You’ll also have to have at least a 30 percent down payment. On a $300,000 home, that’s around $90,000.
At As-Is Loans, we’ll work with you no matter what your situation. Call today to see what we can do for you.