The average mortgage applicant understands how the process works. When an application is submitted, lenders will verify information and consider the merits of the application. During this process, lenders perform background checks and analyze an applicant’s financial situation. Most lenders obtain tax transcripts from the IRS, but not everyone wants to, or can, submit tax returns in this situation.
A Different Situation For Each Applicant
Some applicants work for themselves and don’t receive a W-2. Others work with and get paid in cash rather than through checks or bank transfers. On top of that, some individuals simply don’t want to supply so much information to a lender. They might prefer to avoid disclosing their income and other financial information. These situations are somewhat rare. Still, solutions are available for individuals here.
No Doc and Low Doc Mortgage Loans
First and foremost, applicants should understand most major banks won’t accommodate these situations. Only smaller lenders or those that provide riskier loans will consider such an applicant. “No Doc” and “Low Doc” loans are sometimes available to prospective home buyers. With these loans, a given applicant can expect to receive a high-interest rate and a lower-than-normal maximum loan amount, among other downsides.
Excellent, and we mean excellent, credit is required to apply for these loans. A No Doc loan allows someone to avoid submitting tax returns or transcripts. However, they’ll still need to submit to a credit check and prove a source of income. Such loans don’t act as shortcuts for obtaining a mortgage loan. Many applicants might even find this option more difficult to receive approval for compared to traditional mortgage loans.
In the end, No Doc and Low Doc mortgage loans are excellent options for certain borrowers. Individuals in the right situation can receive loan approval when they otherwise wouldn’t through a traditional bank or financial institution. Someone that has an impeccable credit history and a high level of income should consider this solution for buying a home.