subject: No Doc Loans Mean You Can Borrow Even If You Can't Prove Income [print this page] No Doc Loans Mean You Can Borrow Even If You Can't Prove Income
As hard as it is to believe there are actually loans available that require little or no paperwork be submitted to verify your income. These loans are referred to as no doc loans. When it comes to borrowing money with "no doc" your word is your bond. Instead of providing the bank with backup documentation of all your income and projected income, you provide only a certificate that personally verifies your accounting of your income. In some cases, you may not even be required to submit this.
No doc loans are designed for people who are self employed or have some other type of income that is not verifiable. In most cases they have a large, high value portfolio of assets. It is assumed that the person also has a very good credit history. No doc loans are very similar to low doc loans with the added benefit of requiring even less paperwork. They can be extremely convenient and normally have a much more streamlined evaluation and decision making process.
Before you get excited and rush down to your friendly neighborhood banker to sign up for this easy money, take a deep breath and think about it. Why would a bank borrow you a large sum of money without requiring proof of your income. The answer is, of course, that they make up for carrying additional risk by charging more. No doc loans almost always carry higher interest rates than conventional loans and may also carry additional fees. If you are using the no doc loans for a home you will likely be required to pay a larger deposit than you would on a conventional loan. You will also likely be required to carry some type of insurance.
So if no doc loans cost more why would you want to take one on? If your income cannot be verified then no doc loans are the best way for you to get the money you need. For some borrowers the convenience far outweighs the cost. For business borrowers no doc loans are a good way to borrow for capital equipment or other expenses.
So what do you as a borrower need to look out for when you prepare to undertake no doc loans? Well, what you look for are the same things you look for in a conventional loan. Shop around for the most favorable terms and fees, read the fine print, and make sure that you know what you are signing. A good rule of thumb for interest rates is 1-2% higher than a conventional loan. Fees you can best tell by requesting quotations.
No doc loans are the perfect solution for borrowers with good credit and substantial. With a little research you can find a good, fair deal from a lender you can trust. Use the same caution you would in taking out any loan but be prepared to put up some cash, particularly if you are financing a home. With the many different types of loans available today there is no reason you can't get a loan even if you can't document your income.
