California Home Equity Loan

If you have a good income but can’t verify it, a no doc home loan, low doc or no document loan could be for you. With this type of loan, verification of income is not required. The name no document is a little misleading. For all types of loans there is some paperwork needed. These types of loans basically refer to the fact that documentation for income is not necessary.

A no document loan is best for self-employed people, independent contractors, or people who make a significant amount of money in tips or bonuses. In order to qualify for these higher risk loans, you will need a very good credit score, around 700 or more. Due to the higher risk, no doc home loans are usually more expensive than traditional loans. Investors may also benefit from no doc loans because they have good incomes but don’t have the tax returns or W-2s to document it.

There are other situations that may make a no document loan work for some prospective home buyers. If one spouse has bad credit that would normally disqualify them from a loan, you can use the total household income but don’t put that spouse(and therefore their credit) on the loan application.

There are 3 main types of Low Doc or No Document Loans.

No Ratio Loans
If you will have a hard time getting documentation for your income, a no ratio loan may be for you. For this type of loan, the debt to income ratio is not considered. Borrowers do not disclose their income so there is nothing to calculate. The debt to income ratio is a major factor in approving a loan and setting rates. Since there is no income to consider, lenders must rely on other factors in approving the loan such as credit score and assets.

NINA - No income - no assets
Some people rigorously guard their privacy. They do not want to give out any information such as employment, income or assets. If you have a very high credit score, it is still possible to get a mortgage without this information. The lender will consider the application based on your credit score and the value of the home. Your interest rate will probably be 1 to 2% higher than traditional mortgages.

Stated-Income (Low Doc) Loans
Some people rely heavily on bonuses or income that fluctuates week to week, or month to month. If this is you, a stated-income loan may be what gets you into your house. You don’t have to document your income but you have to state the nature of your employment and your stated income should be in a normal range for that line of work.

Educate yourself about the different types of mortgage loans. If you think a no doc home loan or low doc loan is right for your situation, talk to a lender or mortgage broker.

Article was made by Reese Evans

In the recent years when housing prices were going up and up, banks were willing to give home loans to people even if they had bad credit, because the equity in the home would make up for the risk involved. It appeared that home prices would keep rising, and so banks kept lending and making commissions on the money they lent out. As real estate became more and more profitable, builders built more and more homes.

Unfortunately they built too many, too quickly. What followed was the “mortgage crisis” that everyone talks about and which we’re still feeling the effects of. Because there were too many houses on the market, prices started to go back down. Sometimes people had a mortgage loan that was more than their house was worth.

During these boom times, people with bad credit were given loans, but these loans often had high interest rates. Sometimes the rates started out low, but then increased as the years went by. Since the home loan was more than the worth of the house, it was impossible for people to sell, and because the payments were going up, they often were stuck with homes they could not afford.

People began to default on their loans, and their homes went into foreclosure, where they were taken back by the bank who gave out the mortgage. This led to more and more houses being put on the market, which made prices go lower, which led to a vicious cycle that we are all still feeling the effects of today.

It’s getting harder and harder for people with bad credit to get a home loan. In the wake of the mortgage meltdown, lenders have gotten stricter and stricter about who they will lend money to. Even people with good credit are finding it more difficult to get a loan, or to get one with good terms. During the period where home prices were rising, many mortgages were given with little to no money down. This made it easy for people to get a loan who couldn’t afford much up front, but those days are now over.

It is still possible for someone with bad credit to get a loan, but it will probably require a much bigger down payment. In some cases a bank may require twenty five or thirty percent of the price of the home in order to grant a loan. You can shop around and compare mortgage lenders to find out who will give you the best loan with the best terms.

Article done by John H. Drake