Self-employment is a dream that has become more attainable than ever. With the rise of the gig economy, e-commerce, and social media marketing, entrepreneurs can bring their products and services to market more easily than ever before. Self-employment can afford a flexible lifestyle and give workers the opportunity to meld their passions with their profession. However, there are some drawbacks. One of the biggest challenges that self-employed workers face is getting personal loans and mortgages. AS-IS Loans offers a solution.
In this article, we’ll discuss a great loan option for self-employed workers—the no doc mortgage. Many self-employed clients worry about providing the appropriate documentation to secure a tradition mortgage. These documents can include proof of long-term income, tax records, and long lists of assets. While the self-employed may have trouble producing some documents, that doesn’t mean they aren’t responsible borrowers. A no doc mortgage from AS-IS Loans can provide the flexibility and funding of a quality mortgage to a self-employed borrower without the restrictions of a traditional loan.
What Is a No Doc Mortgage?
The term “no doc” in a no doc mortgage refers to “no documentation.” When applying for a tradition mortgage, borrowers usually offer a mix of documents as proof that they have the financial stability to pay the loan back. These documents can include bank statements, tax records, asset appraisals, and proof of steady and long-term employment. When applying to a no doc loan, a self-employed borrower can submit as little as a credit check and an appraisal of the property they wish to purchase. This can be a great option for borrowers who are financially stable but don’t earn money on a predictable pay schedule.
With a no doc loan, you don’t need to submit any documents, but you may be able to improve your application by submitting some alternative documents. These can show that while you don’t always earn the same amount of money every month, you do earn a solid income. Similar to a no doc loan, a hard money loan substitutes collateral such as property for traditional documentation. Some of those documents include:
- A personal declaration of your annual income
- Your self-employment business’s registration details
- A valid tax ID number
- A business activity statement
- Six or more months of stock market activity statements
Similar to a no doc loan, a hard money loan substitutes collateral such as property for traditional documentation. This type of loan speeds up the process and provides increased flexibility.
What Are the Costs and Risks of a No Doc Loan?
No doc mortgages are usually associated with some higher costs when compared with traditional mortgages. Since lenders won’t have as clear a picture of a borrower’s financial purview, they offset this risk with higher interest rates and may charge additional fees. No doc mortgages don’t usually cover the entire purchase price, and a larger amount of the purchase must be put down. If you apply for a no doc loan, expect to put at least 20 percent down, but this can go as high as 40 percent depending on the buyer, lender, and property involved.
While no doc mortgages are an excellent option for self-employed borrowers, they can also work for borrowers who prefer greater financial privacy. Since no doc mortgages expose far less of a borrower’s financial information, they are also a good choice for those who demand greater privacy from a lender and are willing to pay a premium for it. In an age of data breaches, identity theft, and frictionless transfers of personal information, the costs associated with a no doc loan could be thought of as an insurance premium for the protection of your personal info.
Is a No Doc Loan My Only Option if I’m Self-Employed?
If you are self-employed or unwilling to provide traditional mortgage documentation but don’t want to incur the higher costs of a no doc loan, there is an alternative choice. Low doc loans fall in between a traditional mortgage and no doc loan by requiring slightly more information but offering lower interest rates. A low doc loan could be a great choice for self-employed borrowers who have a very strong financial package but are missing just a few critical documents needed for a traditional mortgage.
There are a few different types of low doc mortgages available to self-employed borrowers including a no ratio mortgage and a no income verification mortgage. With a no ratio mortgage, borrows submit proof of their assets and proof of employment but are not required to represent their income. With a no income verification mortgage, borrowers provide a statement of income, employment history, and assets but do not need to have their income verified by the lender.
If you’re self-employed, then you know how hard it is to build a business from the ground up. Here at AS-IS Loans, we understand that too. We value self-employed clients and want to provide you with a high quality and fair mortgage regardless of your documentation. Contact AS-IS Loans today to see if a hard money loan or a no doc or low doc mortgage could be right for your next property purchase.