Your loan officer or broker will ask several questions which will help them establish which documentation choices are available to you. They may also explain the rate or cost difference between the choices. The loan officer will many questions to determine how much disclosure you are willing to provide.
Disclosure, Disclosure, Disclosure…
There are several factors that lenders will use to qualify you “the borrower” . The more documentation you provide to your lender (employment, income and credit history) the lower your interest rate you will be offered.
Many home buyers choose not to offer income or assets documentation for personal privacy reasons, and willingly decide to opt for a higher interest rate. Yet, many of these home buyers have a healthy income, or savings, and a credit history . A no doc (documentation) or low doc loan provides increased ease and privacy when getting a mortgage in exchange for a slightly higher rate.
Whether you are purchasing or refinancing you “the borrower” may opt for a low doc or no doc home loan. Many people do not wish to disclose their full financial, income, and asset information in order to obtain a home loan. For instance, they might be using an inheritance to secure a loan or have fluctuating income (Ex: commissions or business income) from being self employed. Ease is a big factor as well. With a no doc or low doc loan, the borrower provides their name and social security number, along with information regarding the property being purchased. The rest is up to the lender.