Lo Doc Loans Can Be A Good Deal For both Borrower and Lender

Lo Doc Loans Can Be A Good Deal For both Borrower and Lender

Considering the volatile financial times we live in it doesn't take a genius to know that no two people's economic needs are the same. The rules are constantly changing and in order to succeed we have to come up with all sorts of unique ways to make a living. That means that borrowing needs come in all shapes and sizes. If you are someone who works for him or herself or you get paid primarily in cash what do you do when you need to borrow money? You may have a very good and stable income but just not have the traditional paperwork to prove it.

It used to be that unless you had concrete proof of your income through pay stubs or tax documents you were simply out of luck when it came to getting a loan. Fortunately we now have access to a variety of loan types including something referred to as lo doc loans. A lo doc loan is simply a loan that doesn't require all the substantiation that we normally think of when it comes to borrowing. Instead of the paper work you provide the lending institution with a certification of your income.

The lo doc loan is heaven sent for borrowers with good credit history who just don't have hardcopy proof. For the bank it's a good deal too since the increased risk that comes from loaning money this way means that they can charge a higher interest rate (somewhere between 1 and 2%) and somewhat higher fees. When used to finance a mortgage a lo doc loan may be limited to 80% of the property value and the lender may require additional fees.

It may seem at first glance that the additional costs associated with the lo doc loan would make them impractical. For many borrowers, however, it just makes good sense. Since the bank is taking on more risk, the additional cost is understandable. Even though a lo doc loan will cost you more, it can be an excellent way to get the money you need if you just don't have the documentation a traditional loan requires. Of course the better your credit history and the more substantial your assets, the more favorable the terms of the loan will likely be.

As with any type of loan, you need to do a little research before taking on your lo doc loan. Shop around for the best terms and read all the fine print. You want to be sure that there are no surprises when it comes to closing on your loan. Reputable lenders will provide you with full disclosure on what you will be expected to pay for your lo doc loan and what your out of pocket expenses will be. While you may not be able to get hard actual numbers until you actually go through the application process, most lo doc loan vendors can provide you with a good estimate of your costs.

A lo doc loan can be a good deal both for the borrower and the lender. Do you homework, find a lender that you are comfortable with and start the process. You'll have the financing you need in no time at all.

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