No Doc Mortgage: Need a Mortgage with Less Required Documentation?

Do you need a home mortgage loan, but you don't want to divulge personal information such as employment information, income, or assets? Are you self-employed and do not have the type of income verification or tax documents needed to qualify for a traditional mortgage?

If these questions apply to you, consider a no doc or low doc mortgage.

No Doc Mortgage

If you want to maintain financial privacy during the loan application process, a no doc mortgage is a great option. With a no doc mortgage, lenders require applicants to submit much less documentation than with a traditional home loan.

• What You Must Show - With most home loans, applicants must state employment information, income verification, tax documents, and assets. With a no doc mortgage loan, however, lenders base approval simply on the applicant's credit score and value of the home he or she wishes to buy. Lenders only offer a no doc mortgage loan to applicants with superior credit scores, since they are taking a big risk by requiring such little mortgage documentation.

Low Doc Mortgages

There are two other types of low doc mortgage loans that are good options for those with complicated finances or self-employed individuals who may have difficulty providing income documentation.

• No Ratio Mortgage - A no ratio mortgage is a low doc mortgage where applicants must state assets and employment but not income. Wealthy individuals who live off of investments and/or have complicated finances (e.g. recently unemployed or recently divorced persons) often seek a no ratio mortgage.

• No Income Verification Mortgage - A no income verification mortgage is a low doc loan for workers who do not receive a regular paycheck from an employer (e.g. self-employed persons). Applicants must state all assets, as well as employment history and income; however, you do not have to verify your income by providing documentation. A written statement of income will suffice.

The Cost of Privacy

Maintaining financial privacy comes at a cost. The more mortgage documentation you provide to the lender, the lower your interest rate will be. Since a no doc mortgage is the most private mortgage of all, it is also the most expensive and has a significantly higher interest rate than traditional loans. If financial privacy is of the up-most importance to you, however, the additional expense may be worth it.

To find out if a no doc mortgage or low doc mortgage loan is right for you, speak with your financial advisor or a trustworthy lender.