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What is a no-doc mortgage?

What is a no-doc mortgage?

A mortgage solution for atypical borrowers

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Updated: 07/12/2023

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Not every buyer fits perfectly into a lender’s eligibility criteria — especially buyers who have unpredictable income from owning a small business or being self-employed.

Traditional mortgage applications often require extensive documentation and income verification, which can be challenging for individuals with nontraditional income sources. A no-doc mortgage can provide an alternative solution for these borrowers by offering more flexibility in its documentation requirements.

Key insights

No-doc mortgages, short for "no-documentation mortgages," are loans that require minimal documentation compared with traditional mortgages.
No-doc mortgages typically require a higher down payment and may have higher interest rates than traditional mortgages.
Alternative documentation, such as bank statements, asset statements or a letter from a certified public accountant, may be required to support the loan application.

How do no-doc mortgages work?

With no-doc mortgages, a borrower's income and financial information are verified through unusual measures that are different than the measures used to verify applications for traditional mortgages. For example, a buyer might be able to show proof of assets, bank statements and a letter from their accountant rather than a typical W-2.

This type of loan saw a peak in popularity in the years preceding the 2007-2008 financial crisis, during a period when some lenders relaxed their underwriting processes by not taking the time to properly verify applicants’ income information. After that fiasco, no-doc mortgages became harder to find, and new regulations, such as the “ability-to-repay rule,” were introduced to protect lenders and buyers from unstable lending practices.

Today’s no-doc mortgages are stricter than those that were offered in the early 2000s. Lenders now require more thorough verification of a borrower's ability to repay the loan to mitigate the risk of defaults and foreclosures.

While lenders might not advertise the option for a no-doc mortgage, more lenders are making accommodations for nontraditional borrowers due to the uptick in self-employed and freelance workers.

» MORE: How to choose a mortgage lender

Can you get a mortgage without income verification?

As a general rule, no-doc mortgages don’t require formal income verification. However, this requirement will vary by lender. You might not need to show a W-2 or pay stubs, but you will need to prove that you can afford the house and are a low-risk borrower.

Compared with other types of mortgages, no-doc mortgages have higher rates, down payments and credit score requirements.

If you’re self-employed or own your own business, your tax return or business statements may be complex, making it difficult for a lender to interpret your true income versus the income of the business as a whole. A no-doc mortgage allows applicants in these situations to submit other documentation to prove their ability to repay the loan, such as the following:

Bank statements
Investment account statements
Business or personal tax returns
1099 forms
Profit/loss statements

Types of no-doc mortgages

There are several different types of no-doc and low-doc mortgages.

SIVA loans: Stated-income, verified-assets (SIVA) loans, also called bank statement loans, are for individuals who have cash and other verifiable assets but don’t make a traditional income. You’ll still need to estimate your income for the application (called “stated income”).
For example, an individual who earns a majority of their income in cash tips and gratuities (like those in the service industry) may need to submit bank account statements to show their ability to repay the loan.
NINA loans: No-income, no-assets (NINA) loans have relatively minimal requirements even by no-doc financing standards, which means they’re more challenging to get approved for. This type of loan is typically only available to real estate investors who purchase rental properties that are expected to earn enough rental income to pay the mortgage.
NIVA loans: No-income, verified-assets (NIVA) loans are similar to SIVA loans: You’ll need to show proof of assets by submitting bank statements or other account statements. However, you won’t be required to state your income on the application. This may be ideal for an individual who has a considerable amount of cash savings but not a lot of income (like a retiree).
NINJA loans: No-income, no-job, no-assets (NINJA) loans have no lender verification requirements. Essentially, the borrower can provide their income and asset information on the application, but the lender will take little to no action to ensure that the information is truthful and accurate. NINJA loans became nearly nonexistent after the 2007-2008 financial crisis.
SISA loans: Lenders offer stated-income, stated-assets (SISA) loans without verifying income or assets. The borrower still states their income and asset information on the application, however. This may be ideal for an individual who owns a business and doesn’t have a standard salary or can’t supply the appropriate documentation for their pay.
If your assets fall under the business you own, for example, the lender would request a bank statement from the business checking account to verify the assets.

Pros and cons of no-doc mortgages

“No-doc mortgages, a somewhat elusive beast in homebuying, provide loans with minimal income or asset verification,” said Gagan Saini, a real estate investor and the director of acquisitions for JiT Home Buyers in Metairie, Louisiana. “They're a potential lifesaver for those with complex incomes but come with challenges — notably, higher interest rates and significant down payments.”

It’s important to know a lender’s policies regarding this type of mortgage from the get-go. A ConsumerAffairs reader from Virginia said they were dragged through months of back-and-forth on a no-doc loan only to eventually learn the lender wouldn’t provide this type of mortgage for a business entity.

Consider these pros and cons of no-doc mortgages before moving forward.

Pros

Minimal documentation requirements: You can demonstrate your earnings and assets with alternative methods.
Ability to qualify with unpredictable income: If your income is not the same every month, a no-doc mortgage can help lenders look at your whole financial picture.
Potentially faster approval: Less paperwork could mean a quicker lender decision.

Cons

Higher interest rate: Expect to receive a higher interest rate than the market rate, even if you have great credit.
Higher down payment requirements: Lenders want to see that you are invested in your home and are a low-risk borrower, so they’ll require a sizable down payment.
Higher credit score to qualify: A traditional mortgage usually requires a credit score of at least 620, but you may need a score of 700 or better for a no-doc mortgage.

» MORE: How to get preapproved for a mortgage

FAQ

Can I use a no-doc mortgage to buy an investment property?

Some types of no-doc mortgages — like no-income, no-assets (NINA) loans — can be used to buy investment properties. The lender will expect an investment property’s projected rental income to at least cover a no-doc mortgage’s monthly payment.

Can I get a no-doc mortgage if I have a low credit score?

No-doc mortgages typically require a strong credit profile and may not be readily available to borrowers with low credit scores. Lenders often look for borrowers with good credit history and a track record of responsible financial behavior to mitigate the risk associated with limited documentation.

Are there specific LTV ratios or down payment requirements for no-doc mortgages?

Each lender will set its own requirements regarding loan-to-value (LTV) ratios and down payments in a way that will minimize the risk of a no-doc mortgage. High minimum down payments and low maximum LTV ratios may be required for no-doc mortgages.

Bottom line

While a no-doc mortgage theoretically offers borrowers the opportunity to purchase property with minimal financial documentation, it is not a widely available mortgage type. If you do find a lender that allows no-doc mortgages, expect a high interest rate and a large down payment requirement, even if you have an excellent credit score.

“Before taking the no-doc route, prospective buyers should treat them cautiously, ensuring the advantages justify the added expenses,” said Saini.

Article sources

ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include: