Many people who have flexible sources of income, or who prefer to keep their financial details private, are not without resources when it comes to applying for, and receiving, a mortgage loan. “No Document” or “Low Document” mortgages (aka “no doc” or “low doc”) are available. Low Doc and No Doc mortgages refer to those which are given to people who provide a minimum of financial documentation.
It should be noted that both these terms, rather than being literal, reference the required paperwork as compared to a traditional mortgage application. Many so-called “low doc” mortgages actually require impressive amounts of paperwork, including tax returns and profit and loss sheets. Even a so-called “no doc” mortgage will require a credit report and a professional appraisal of the property in question.
Of course, what one saves in privacy is paid for in currency. No-doc and low-doc mortgages demand considerably higher interest payments, higher down payments, and excellent credit. However, for those who don’t have a steady paycheck, who live off investments or commissions, or who make an income in cash, it’s often well worth the higher price these mortgages cost. Otherwise, home buying would only be the privilege of those with traditional 9 to 5 jobs.
It should be noted that many leading financial advisers actually encourage individuals to avoid these types of mortgages. However, for those who feel that this is the best solution for their lifestyle and needs, there are three kind of no-doc mortgages: Stated Income Mortgages; No Ratio loans; and NINA loans (No Income, No Asset verification). Unless you’re exceptionally wealthy, the first type (the Stated Income Mortgage) is probably the best for you, as it is most often utilized by individuals that are self-employed, or those who make their income off commission or tips.