Low Documentation Loans

How Low Documentation Loans Work

Getting a mortgage involves a lot of paperwork. Documenting your income and assets is a major part of the process. If your lender or broker hounds you for documentation it's a good sign -- they're trying to get the best mortgage you can qualify for. However, some people can't produce the documents. For them, a low-documentation (or no-documentation) loan is the only answer.

Low documentation loans go by a variety of names:

• Liar Loans
• Low doc
• Lo doc
• No doc

Low Documentation Loan Types

Low documentation loans come in a variety of flavors:

• Stated income
• Stated asset
• Stated income stated asset
• No ratio

Reasons for Low Documentation Loans

Some borrowers cannot (or don't want to) provide information to a lender. There are a variety of reasons to use a low-documentation loan, such as:

• Self employed people prefer to show lower income for tax purposes
• Young workers have a history of low wages or no wages
• New business owners cannot show a past of consistent earnings
• Privacy needs dictate that you keep your income level to yourself
• Finding and organizing documentation is too difficult
• Your income or assets are not documented in any way acceptable to the lender

Qualifying for Low Documentation Loans

Not just anybody can get a low documentation loan. The lender needs to feel comfortable that you'll repay your loan. You'll need to have good credit. One or more of the following factors will also help:

• High income
• Liquid assets
• Good debt to income ratios
• Small loan to value ratio