Pros and cons of mortgage loans without documents

Pros and cons of mortgage loans without documents

There are many borrowers in today’s market who do not fit the traditional model, especially in terms of their employment ie. commission sellers, self-employed, investors, etc. Realizing this fact, the mortgage industry adapted by creating programs known as no-document loans, where borrowers qualify based on their credit history without the need to document income and assets. Below are some pros and cons to consider if you fall into this category:


1. Ordinary insurance

If this is the only loan you qualify for, there is at least some good news. Since you’re not proving anything, there’s not much to do. Your lender will review your credit history to make sure you qualify. The underwriter will then take a close look at the home appraisal and your credit profile. If these two things check, you’re usually ready to close.


1. Higher interest rates

Because you’re not proving your ability to repay the loan, you can expect to pay much higher interest rates than the typical borrower. Whenever you are a high risk to your lender, you will have to pay more.

2. Larger down payment/Less access to equity

The more you borrow against the value of your home, the riskier you are to your lender. When you buy a home under this program, you’ll need a significant down payment, and you’ll have less access to your equity when you refinance.

Although there seem to be more downsides than upsides to loans like this, they are still the best option if you can’t prove your income and assets. Consider the alternatives and get one if you really need it. Then start planning how you can refinance in a few years under better circumstances.

#Pros #cons #mortgage #loans #documents

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