Low Doc and No Doc Mortgage Loans. One of the biggest changes in the current home loan market is the limited selection of low documentation home loans.
However, there are still companies and investors supporting the low doc and no doc mortgage product for the many home owners and home buyers that need to get a loan requiring less documentation than Fannie Mae and Freddie Mac government back securities.
Collateral based lenders that offer alternative low doc and no doc loans are not as easy to find and evaluate as your traditional lending sources, but some may be able to offer you the home loan program you need. While many do collect income documentation and asset information, they can rely heavily on the asset credentials and loan-to-value.
So, there is help if you do your research for low doc and no doc loans! It’s difficult to calculate how many home buyers and home owners exist that need low doc and no doc mortgage loans, but it is substantial. Low doc and no doc mortgage loan products were pervasive up to about mid-2007 and then started to disappear rather quickly. As delinquencies started to become a concern due to softening real estate markets, the money banks began to modify and tighten credit policy and subsequent underwriting guidelines for low doc and no doc mortgages. Changes to no/low doc home loans started quarterly, then monthly, and eventually increased to several policy revisions per week until products disappeared altogether along with hundreds of lenders and thousands of mortgage brokers offering alternative, low, and no documentation home loans.
The absence of low doc and no doc mortgage loan products left a consequential void in the market causing many excellent credit borrowers to sit on the sideline over the last several years. Many are still waiting for help and an opportunity to either refinance their current home mortgage to a lower rate, refinance to receive cash out, or buy a home. Recently, a growing number of consumers are discovering that private money mortgage lenders, or collateral lenders, are picking up the slack in this sector of the home loan market and offering low doc and no doc options. Finding private mortgage lenders is not as much a challenge as is finding the best offer for low doc and no doc loans.
With no centralized underwriting policy like the GSE’s, private money lenders create their own credit policy and underwriting guidelines. Therefore, each lender determines what to offer clients.
Maximum loan amount, property type, loan-to-value (LTV), credit, interest rates, points, fees, and other variables are exactly that, highly variable from lender to lender. Moreover, many if not all now collect income and asset information as part of the loan approval process, but tend to underwrite the file more like a low doc and no doc mortgage. Therefore, in some ways the application, underwriting, and loan approval process is not all that different from mainstream lending. However, the guidelines and underwriting are much easier.
Private money credit policy is different than conventional loans and the mortgage is not insured against loss like government backed securities. This causes rates and fees to be significantly different especially for low doc and no doc mortgages. As with the regular lending path, it is best to do your research and have several lenders provide quotes and compete for your business.