What is a No Doc Mortgage?

A so-called “no doc” mortgage is a way to get a home mortgage without revealing very much about your financial circumstances. You don’t have to provide a lot of documents, thus “no doc.” You do have to pay more to get the loan, however.

Most people applying for a conventional mortgage lead uninteresting financial lives in which they get a regular paycheck and have savings accounts and retirement plans. Most people don’t mind telling all about their financial condition to a lender if it will help them get a mortgage. But not everybody fits this stereotype.

What if you are a business owner who has an income that goes wildly up and down with the business cycle? You may not want to tell your local banker all about your business, and even if you did, it might not help you to qualify for a mortgage if the income is too volatile. What if you are a vendor who takes in all his income in cash and thus have no paycheck to show? What if your financial circumstances are complicated or personal (possibly involving investments, trust accounts, or structured settlements) and you don’t wish to go into all this complicated detail? What if you make your money from illegal activities? If you are one of these, you might be a candidate for a no doc mortgage, even if it costs more interest. To some people, the privacy is worth the extra cost.

Although the no doc and its cousin the “low doc” mortgage require less documentation than normal, there will be some documentation such as a credit report or property appraisal. Borrowers may also be asked to make a larger than normal down payment.