No-Doc Loans:  A thing of the past

Before 2007 or so, you could often get a bank loan without supplying things like proof of income, or just about any other financial information for that matter.  All that went away after the subprime lending crisis of 2007.  Banks had previously given out loans like candy and that came back to bite them when borrowers couldn't repay their loans and the banks had to foreclose, usually at a loss.  So after that, banks stopped giving out loans so freely, and then new regulations made sure that they couldn't go back to their old ways. (PDF)  So now you'll have to qualify for a mortgage the normal way.

The rest of this page is here for historical purposes.  You can no longer get a no-doc, no-ratio, or stated-income loan.


Historical information about No-Doc and Stated Income loans

These loans are for people who can't (or don't want to) provide details about their income or their employment. The most popular is called a Stated Income loan because you just "state" how much income you have without offering any proof. It's also called NIV for "No Income Verification" because your income isn't verified. Weth No Ratio and No Doc loans, you don't even say how much you make. You can think of these as "Don't Ask, Don't Tell" loans. The No Doc is also called NINA, for "No Income & No Asset verification". Because income is never proven with any of these loans I joking call them the "Drug Dealer Loans", though of course there are many legitimate reasons for wanting a loan of this type.
Since the bank is taking a bigger risk on you with a No-Doc or Low-Doc loan, the interest rate is higher than on a traditional loan, and the exact amount depends on your credit score, your lender's preference, and which flavor of low-doc/no-doc loan you get. The premium you'll pay will range 0.125 to 3.0 percentage points over a traditional loan.

I got one of these loans myself once. I had started a new business a year earlier and was easily making enough money to make the mortgage payments on the house I wanted, but because the business was brand-new I didn't have income history and there was no way a bank would give me a traditional loan. My good credit, and my willingness to pay a tiny amount of extra interest, was enough to get me the loan without having to supply any paperwork.

Here's how the different loans stack up.

 

What you need for each kind of loan

Regular Loan
Stated Income
("NIV")
No Ratio
No-Doc
("NINA")

Income

You provide proof (e.g., paycheck stubs, W2's)

You just tell the banker how much you make and they take your word for it

You don't even say how much you make. (Don't ask, don't tell.)

Down Payment Needed
✔
Small
✔
Small to Bigger
✔✔
Bigger
✔✔✔
Biggest

Credit Required
✔
Fair
✔✔
Good
✔✔
Excellent
✔✔✔
Near-Perfect

Employment History
✔
✔

Proof of Assets
✔
✔
Possible

Proof of Income
✔


Interest Rate
✔
Lowest
✔✔
Higher
(+0.125% to 1% higher)
✔✔✔
Highest
✔✔✔
Highest
(up to 3% higher)




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