Getting a mortgage is a lengthy and complicated process. Most traditional mortgage loans require extensive documents to verify your overall financial health. However, you can also get a mortgage loan without these documents. Whether you are looking to ensure privacy or if your income is difficult to prove, a no-doc mortgage can be a great option.
What Is A No-Doc Mortgage Loan?
A no-doc mortgage loan or no-income verification mortgage refers to a mortgage loan that does not require the standard list of income documents. Income documents required for a traditional mortgage loan include pay stubs, W-2 forms, and tax returns.
Instead of requiring these documents, a no-doc mortgage loan will accept bank statements as proof of income and/or financial health. No-doc loans were created to allow seasonal workers, self-employed individuals, and independent contractors to be able to obtain a mortgage loan.
No-doc mortgage loans have evolved considerably since their origin. Before the housing crisis of 2008, no-doc mortgage loans were a popular option because mortgage lenders did not need to verify the borrower's ability to pay back the mortgage loan. However, this led many individuals to have loans they were unable to repay.
Today, federal laws require all mortgage lenders to verify borrowers' income and/or assets to ensure they are qualified to repay. A no-doc mortgage is still a viable option for people who have a complicated income situation.
How Do No-Doc Mortgages Work?
No-doc mortgages function similarly to conventional loans. The main difference between how conventional mortgages work compared to no-doc mortgages is the documentation required to obtain the loan.
In general, no-doc loans require higher credit scores, larger down payments, and have higher interest rates. However, they still have the same benefit that traditional mortgage loans have: they allow people to borrow the funds necessary to purchase the property.
Government regulations have made no-doc loans more difficult to obtain compared to conventional loans. This does not mean that a no-doc mortgage is impossible to get. Instead, these government regulations ensure that mortgage loans are not going to anyone who is not qualified to buy real estate.
Five Types Of No-Doc And Low-Doc Mortgages
Several types of mortgages and mortgage loans fall under the no-doc and low-doc mortgage loan umbrella. Here are the five main types of no-doc and low-doc mortgage loans:
- SISA – A SISA loan stands for a stated-income, stated-assets loan. This type of loan requires that you disclose your annual income and assets on the application, and the lender trusts the amount that you state. Because of the housing market crash in 2008, SISA no-doc mortgage loans are severely restricted. This type of no-doc mortgage loan is a good fit for people looking to purchase an investment property.
- SIVA – A SIVA loan stands for a stated-income, verified-assets loan, which also requires the borrower to state their income on the application, and the mortgage lender verifies their assets. Lenders will often ask for anywhere between six months and two years of bank statements. A SIVA loan is a good fit for self-employed individuals with a high net worth as well as individuals who primarily rely on cash income.
- NIVA – A NIVA loan stands for a no-income, verified-assets loan. They do not require the borrower to state their income on any documents in the mortgage application process. The lender verifies the borrower's assets only. A NIVA loan is a good fit for borrowers who do not have income, such as retired individuals. A retiree can provide statements from their pension, 401(k), or other investment accounts.
- NINA – A NINA loan stands for a no-income, no-assets loan. This has the fewest requirements of all no-doc and low-doc mortgage loans. For a NINA loan, the borrower just provides their name, social security number, address of the property, and pays the down payment. Mortgage lenders will usually do a good-faith check to ensure the borrower can repay the loan. A NINA loan is a good fit for people looking for maximum privacy and the least amount of paperwork.
- NINJA – A NINJA loan stands for no-income, no-job, and no-assets loan. This type of mortgage loan is similar to a NINA loan except that the borrower does not have a job or employment for income. The lender will rely solely on the borrower's credit score to verify that they are able to repay the mortgage loan. NINJA loans are hard to come by since the housing crisis, but they are a good fit for people who are not employed.
When Should You Get A No-Doc Mortgage?
No-doc loans and no-income verification mortgages are worth considering if you'd have trouble qualifying for a traditional mortgage. If you have sufficient funds to purchase property but standard income documents do not reflect your ability to repay, a no-doc mortgage is an option. There are several scenarios when a no-doc mortgage is a good idea, which includes if you are:
- Retired
- Self-Employed
- Employed By A Foreign Company
- Employed Seasonally And / Or Earning Irregularly
- An Independent Contractor
- Earning In Cash
- Reliant On Inheritance For Income
- No Longer Requiring Income/Have A High Net Worth
- Investing In Real Estate
- Looking For Maximum Privacy
These are some of the most common scenarios for obtaining a no-doc mortgage or no-income verification mortgage. If you have any of the conditions listed above, no-doc loans could be a good choice for you.
Additionally, there are some unique scenarios that require a no-income verification mortgage. For example, if you won the lottery or if your business recently deducted sizable expenses, a no-doc mortgage is a much better option compared to a traditional mortgage loan.
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