What is a "No Doc Loan?"

The term "no doc loan" is a mortgage industry term that is short for "no documentation loan." It ranks right up there with "credit score" as one of the most over-used and misunderstood of common mortgage terms.  Many potential borrowers and many inexperienced (and experienced)  mortgage people refer to all kinds of limited or reduced documentation loans as "no doc loans."  This creates a lot of confusion and headaches for those looking to purchase or refinance a home in much the same way that the credit bureaus give out different credit scores to consumers than they do to mortgage lenders. 

Real or true no doc loans (as some lenders called them) did not require income, asset or employment information to be disclosed or verified. They simply required good credit and good equity or down payment and they have been discontinued by all but a few lenders that are now doing them with 40% or more down and rates approaching double digits. Not quite as bad as hard money loan rates and fees, but expensive nonetheless.

Needless to say there are still some excellent "low doc" and reduced documentation loans available in the mortgage marketplace (for now) and they look a lot like the no income and stated income loans from the 90's when things were a lot more sensible. These are excellent mortgage loans for the self-employed.

Many loan officers and mortgage brokers still refer to all of the following as a "no doc loan":

1) stated income loans

2) stated income/stated asset loans

3) no income verification loans

Each of these programs eliminates the need for some of the traditional mortgage loan documentation, but none of them is a real no doc loan requiring just appraisal, credit and clear title. They all require excellent credit. 

MyMortgageBanker.com is a division of a federally regulated commercial bank and a nationwide direct lender that offers all types of mortgage loans, but specializes in working with the self-employed.