A no-documentation or "no-doc" mortgage is a product that certain lenders offer to borrowers which generally requires a down payment of at least 5 percent to 30 percent or more of the home purchase price or who generally have at least 25 percent equity in their home. Loan programs featuring lower down payments (5-24 percent) are also available to borrowers with excellent credit. And if you have less-than-perfect credit, there are options such as FHA loans.
No-doc mortgages are generally a wise choice for self-employed people, those who do not wish to verify their income, and those with a brief or blemished credit history, or no credit. The benefits of a no-doc mortgage include a shorter application process since you are not required to provide income, employment or asset documentation, as well as a streamlined approval process through the lender because there is little subsequent verification. However, no-doc mortgages generally will be at slightly higher interest rates and are offered by fewer lenders.
A good source for finding a no-doc mortgage is a mortgage broker. A mortgage broker is a person or entity that specializes in loan originations, receiving a commission to match borrowers and lenders. The mortgage broker performs some or most of the loan processing functions such as taking loan applications and ordering credit reports, appraisals, and title reports. Typically the mortgage broker does not underwrite the loan and generally does not use its own funds for closing. The mortgage is generally closed in the name of the lender who commissioned the broker's services. A mortgage broker will not service the mortgage. The broker is typically engaged to handle or perform, for a seller or correspondent, part of the mortgage application processing, underwriting, funding or postclosing functions, but not any activities related to obtaining an application for a wholesale origination.
Since mortgage brokers are paid by lenders to match them with borrowers, a mortgage broker may be aware of special programs, like a no-doc mortgages from a certain lender that probably wouldn’t be made available by a large bank.
As with any mortgage, be sure you know what products are available to you and what each kind of mortgage and interest rate feature means for your finances. This can help you decide if a no-doc mortgage is right for you, or if you can get a more affordable plan with another kind of loan.