No-doc mortgages: what are they and how do they work?

Prospective buyers who do not have a full-time job or whose income is considered irregular may not have the proof of employment typically associated with a mortgage. However, these consumers don’t have to completely give up on their dream of becoming homeowners.

Instead, they might be eligible for a mortgage without documentationalso known as mortgage without doc, mortgage without income verification or mortgage without income, job or assets (NINJA).

As the name suggests, there is less paperwork involved in getting approved for a no-doc mortgage. Lenders will go through non-traditional channels to verify a borrower’s income.

In this article, you’ll find out what no-doc mortgages are and their requirements, who may qualify, and whether or not it may be the best option for you.

What is a no-document mortgage and how does it work?

No-doc mortgages don’t require the normal type of documentation for most loans, such as bank statements or recent pay stubs. This type of mortgage is usually for people who don’t have tax forms from an employer or want their information kept confidential.

Depending on the situation, you will still need to provide proof of income.

Since no-doc loans are risky for lenders, your interest rate will be much higher than usual and you may need to consult several companies before someone bets on you. You are unlikely to find no-doc loans at the big banks.

To have a realistic chance of being approved, you will need to have an excellent credit score.

If your credit score is not 740 or higheryou will have to make every effort to increase it before applying for this type of loan.

What is a no-ratio loan?

No ratio loan is another variety of no doc loans. It’s mainly for people who don’t want to disclose their income or have complicated and fluctuating sources of income.

Although most borrowers should have a debt to income ratio below 43% to qualify for a loan, a no-ratio loan means lenders won’t consider your DTI.

To qualify for a no-ratio loan, you’ll also need a solid credit rating, and it’s ideal to have significant assets as well. With this type of loan carrying considerable risk for the lenders, you can expect to pay a higher interest rate than where you prove your income.

Are no-document mortgages still available?

Although considered a niche product in the housing industry that has always been associated with subprime lenders, no-doc mortgages still exist and continue to evolve today.

Since the housing crisis of 2007/2008, during which traditional lenders were exposed to subprime mortgages, lending standards on no-doc mortgages have tightened to provide better protection for consumers.

Previously, these loans were the go-to mortgage for the self-employed based on a system of trust between lenders and borrowers on income. These days, it’s not that simple.

This mainly concerns the NINJA mortgage: lenders were not required to verify the borrower’s income, assets or employment status. These loans have mostly disappeared since the Great Financial Crisis.

Who can get a mortgage without a document?

A no-doc mortgage is designed for people outside the realm of the traditional financial system. No-doc mortgages are for wealthy individuals whose employment income is not cut and dry.

For example, an entrepreneur with equity in a startup with enough operating history might be an ideal candidate for a no-documents mortgage. Under these conditions, even an upper-middle-class borrower might not meet the standard.

Circumstances in which you may qualify for an undocumented mortgage include:

  • If your paychecks are sporadic, but you have managed to accumulate savings or liquid assets easily convertible into cash.
  • The self-employed or those working in the gig economy or in restaurants.

Another candidate for no-doc mortgages is someone who receives regular deposits that their bank statements can verify. In this case, they could benefit from a independent mortgage loana term used interchangeably with a no-doc mortgage.

Real estate investors are another category of potential borrowers for a mortgage without documentation. For buyers who have ample cash and whose regular rental income will pay the mortgage, no-doc mortgages could be the ideal solution.

Advantages of a Documentless Mortgage

The main advantage of a no-doc mortgage is that it performs the same function as traditional loans. Ultimately, it helps the consumer become an owner. Plus, borrowers can avoid the excessive paperwork typically required for an application, and they might even speed up the closing process compared to a fully documented loan.

When you’re ready to take advantage of these benefits, find a Total mortgage expert near you to find out if you qualify for a no-doc mortgage.

Requirements for a Documentless Mortgage

You might be wondering what it takes to qualify for a no-doc mortgage. The truth is, what no-doc mortgages lack in paperwork, they make up for in other requirements.

For example, to qualify for a self-employed mortgage, a borrower must maintain a higher credit score than required for a fully documented mortgage. In addition, they will have to pay a higher down payment as a percentage of the purchase price.

  • Minimum deposit: Homebuyers can expect to pay a down payment of 20-30% or more of the purchase price.
  • Minimum credit score: No-doc mortgages have a strict credit score requirement of at least 700, which Experian says falls into the “good” category of credit score rankings.

Explore Total Mortgage Loan Options

No-cost mortgages are for people who don’t have a steady income or a full-time job, but want to become homeowners. Since the risk to the lender is greater with no-doc mortgages, it is quite difficult but not impossible to get one.

If your credit history and financial situation tick all the boxes listed in this article, home ownership may be within your reach with a no-doc mortgage. Otherwise, you may want to explore your options with a traditional mortgage.
We are here to guide you through the process from start to finish.

Take the first step by applying for a mortgage today or find a Total Mortgage branch near you and discuss your options in person with one of our loan advisors.

Thomas Beko

Thomas began his mortgage career in San Francisco, California in 2003 after serving in the US Army, and has over 10 years of experience in the mortgage industry. Contact Thomas by phone at 203-707-5728, or by email at [email protected] NMLS#202157.

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