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REQUIRED LOAN DOCUMENTS FOR MORTGAGE LOAN -II

The next two categories of documentation are No Doc, and Easy Doc. The borrower may apply under these categories, but there are certain exceptions to the category regarding state, etc. And, borrower has to satisfy certain pre defined norms layed down by lender to apply under the category of No Doc or Easy/Limited Doc, which may vary from lender to lender.


No Doc: - It doesn’t require any documents by the borrower.

Limited/Easy Doc: - With Easy / Limited Doc loans little documentation is provided to substantiate the borrower's income and assets.

These loans are mostly for self-employed borrowers who have difficulty verifying all of their income, and for service industry employees, such as bartenders, waiters, and hair stylists who have pay which is difficult to determine precisely. These loans may also be used by borrowers who get most of their income from commissions, or by borrowers with very complex income structures. For example, a borrower who has income primarily from rental properties and investments may be hesitant to verify all sources of income due to the volumes of paperwork this would require. Additionally, borrowers who receive a good portion of their income in cash, such as tips, might also want to consider the Easy Doc loan.

Implications of Limited/Easy & No Doc

The risk associated with Easy / No Doc loans, requires a borrower to make a larger down payment. In many cases, the LTV on an Easy / No Doc loan is limited to 70 -75%. Some lenders, however, may allow a 90% LTV.

Credit standards are generally a little higher for Easy / No Doc loans. Borrowers should have maintained a good repayment history within the last two years before going for a loan.  Additionally, some lenders may also require borrowers to maintain higher bank balances than typical applicants usually have.

Borrowers would also have to pay higher interest rates and fees on loans when little or no documentation is provided to substantiate the borrower's income.  Borrower can expect the interest rate to be about one-half to one percent more than the rates on a fully documented loan.

Consequently, Easy and No Doc loans should only be used when necessary, not simply to avoid the paperwork requirements of a Full Documentation loan.

Easy and No Doc loans could be classified into "Stated Income", "Stated Assets", "No Income Verification (NIV)", "No Income / No Asset (NINA)", "No Ratio", etc. With "Stated Income" loan, the borrower may simply state his income on the application, and do not have to provide any documentation to substantiate the stated income. Lenders usually verify that the borrower has assets that logically match the stated income. With "No Income / No Asset" loan no income and no assets are verified

 

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