How No Doc Mortgage Loans Can Benefit the Self-Employed

No doc loans are a type of mortgage that can significantly benefit the self-employed. With a no doc home loan, you are not subject to the normal requirements that come with a typical mortgage loan. Self-employed people have traditionally had trouble getting approved for home loans because of their income situation. Using a no doc loan could be the solution that many self-employed people are looking for. Here are a few things to consider about no doc home loans and the self employed. 

Proving Income

The biggest problem for many self-employed people is proving their income. When you do not have a regular 9 to 5 job, it can be difficult to prove the amount of money that you make. Lenders like to see that you have a regular monthly income in order to feel safe about giving you a loan. Lenders use several ratios to determine whether or not you qualify. If you do not meet their criteria for debt to income ratio, you will have trouble getting approved. 

Many self-employed people may be able to make enough money to live comfortably. However, it is the regularity of the income that the lender likes to see.  Their income may depend on payments coming through instead of how many hours they worked. You might make a great deal of money one month and follow that up with a bad month. Lenders like to see that you could sustain yourself even with a string of bad months. Therefore, they will take into consideration your level of savings in conjunction with your income level when trying to decide whether or not you are approved.  

Benefit of No Doc Loans

The no doc home loan can help you get past that large hurdle of proving your sufficient income. With a no doc home loan, you do not have to come up with any documentation that you have a certain income. The bank gives you an application to fill out, and they ask you how much you make. You tell them a number, and they have to take you at your word. Therefore, if you say that you make a certain amount of money, there is no questioning or second-guessing going on. They just process the loan as if the income were a sure thing and then give you their decision. 

What to Expect

In order to get a loan like this, you will still have to have a good credit score. They are not going to overlook your credit history just because you tell them that you have a high income. In fact, they are more likely to scrutinize your credit history when you apply for this type of loan. 

When you get a no doc home loan, you should also be prepared to pay a higher rate of interest for it. You are making the bank take a bigger risk than normal because they cannot verify everything. Therefore, you will have to accept the higher interest rate with the increased freedom. 

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