A no-income verification mortgage (a.k.a. a "No-Doc" loan) is designed for folks who have plenty of cash but whose tax returns make them look like they’re living on ramen noodles and pretzels- usually due to all those (legal) business write-offs or retirement.
Instead of the lender eyeballing a couple years worth of income docs, they instead focus on the bigger picture of your wealth.
How does it work?
- The Process: Despite the name, it's not really a "No-Doc". The lender still needs to see that you have a good amount of money saved up. So, instead of a stack of tax returns, the lender may just check out your bank statements & brokerage accounts for the last 2 months to see the value of your accounts.
- The Trade-Off: Because the bank is taking your word you'll pay, without viewing income docs, they want more of a safety net. This means you’ll usually need a bigger down payment (20% or more) and a beefier credit score. A 586 middle credit score won't cut the proverbial mustard on this type of program.
- The Price Tag: Convenience has a cost! Your interest rate will be higher than a standard loan because you’re skipping the paperwork.
Any Catch?
Nope! These aren't low down payment, "wow that's a low credit score you have there mister" loans like the ones that hobbled the economy in 2008. If you want to use one of these "new breed" No-Doc loans on that awesome house that just hit the market, be prepared to have a sweet credit score and put 20% down at least. And don't expect to walk into Anytown USA Bank on Main Street and and walk out with a No-Doc loan. These programs are offered by specialty lenders rather than your local neighborhood bank.
