What is a No-Doc Mortgage Loan?
A no document or no-doc mortgage loan doesn’t require a borrower to provide as much documentation as they might for a conventional mortgage.
Written by Melanie Krieps Mergen
Reviewed by Melanie Reiff
A no-doc mortgage loan is home financing that doesn’t require a borrower to provide as much documentation as they might for a conventional mortgage. However, you might need a higher down payment to qualify, and they’re often offered at higher interest rates.
Before the Great Recession in 2008, a no-doc mortgage required little more than your word for reporting your income. No-doc mortgages are extremely rare now, and while they don’t have as many income verification requirements as conventional mortgages, you’ll still have to provide more documentation than you would have in the past.
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What’s a no-doc mortgage loan?
A no documentation (no-doc) mortgage is a loan that doesn’t require you to verify your income the way you typically need to with a typical home loan.
Instead, these loans are sometimes granted based on factors like a property’s resale value and the way the loan repayments will be set up.
Keep in mind, no-doc mortgage loans may be less regulated than other kinds of home financing, and they commonly require higher down payments and higher interest rates.
How do no-doc mortgages work?
A true no-doc mortgage almost sounds too good to be true. Normally, a no-doc mortgage lender might check your credit, but they’ll take you for your word on your income, as long as you sign a document agreeing to pay the loan.
Can you still get a no-doc mortgage?
No-doc mortgages are pretty rare these days. In fact, true no-doc mortgages legally can’t exist after changes were made following the Great Recession due to their high level of risk for both borrowers and lenders.
As more people defaulted on their mortgages during the 2008 crisis, with many having been approved for larger loan amounts than they could afford, the Consumer Financial Protection Bureau introduced stricter income verification requirements for lenders moving forward.
A more accurate term for most “no-doc” mortgages offered today would be “low-doc” mortgages because some documentation is required for proof of eligibility.
MORE: How to buy a foreclosed home
Types of no-doc mortgages
While true no-doc mortgages are no longer offered in the United States, there are still mortgage options that don’t require quite as much verification as traditional mortgages to show you can afford your loan payments.
The information you’ll need to provide to a no-doc mortgage lender will depend on the loan type you choose. Typically, they’ll require bank statements over a certain period, proof of assets, or a combination of the two.
Here’s a look at different types of loans that often are referred to as no-doc loans and what they require (or don’t require):
Loan type | Definition |
|---|---|
Stated-income loan | Rather than providing documents like a W-2 or a bank statement, borrowers state their income and are taken at their word. These are extremely rare now. |
Stated-income, stated asset (SISA) loans | The borrower self-reports their income and assets without needing to provide documentation. |
No-income, no-asset (NINA) loans | A borrower doesn’t provide proof of income or assets. Instead, they qualify by proving their employment status. These can only be used for investment properties today. |
Stated-income, verified-asset (SIVA) loans | Borrowers can self-report their income without providing documentation, but provide additional verification of assets, like a bank statement, to get loan approval. |
No-income, verified-asset (NIVA) loans | A borrower doesn’t provide proof of income but provides proof of assets. |
No-income, no-job, no-asset loans (NINJA) | A borrower doesn’t provide proof of income, employment, or assets. Approval is based on the borrower’s credit score. These are practically nonexistent now. |
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No-doc mortgages compared to other loans
Though they have similar processes, there are some substantial differences in application requirements between conventional and no-doc mortgages.
With a conventional mortgage, a prospective borrower is required to provide numerous documents that show proof of income, like tax returns, pay stubs, and more.
In contrast, a no-doc mortgage requires very little documentation outside a declaration that states the borrower can repay the home loan.
That said, no-doc mortgages typically require higher down payments—often 30% or more of the cost of the house compared to 20% for a conventional mortgage. They also have higher interest rates than other conventional mortgage options on average.
Should you get a no-doc mortgage?
When is a no-doc mortgage a good idea?
While not always advised, there are some instances in which a no-doc mortgage may make sense.
No-doc mortgages are sometimes used by borrowers who have the financial resources to buy a house but don’t have regular income sources, like self-employed individuals. However, there are still plenty of ways to qualify for conventional mortgages as a self-employed borrower—if you provide a lot of income documentation.
If you have an income that fluctuates from year to year or your income has dropped, it might be easier to get approved for a no-doc mortgage.
No-doc mortgages are also used by landlords, house flippers, and other property investors since they can qualify for certain loan options based on a property’s projected rental income without needing to provide an extensive amount of paperwork.
No-doc mortgages are also used by borrowers who have a high net worth but don’t have a regular income stream.
Considerations before taking out a no-doc mortgage
Because of the higher down payment requirements and higher interest that can come with no-doc mortgages, financial experts generally don’t recommend them for the typical middle-class borrower. Because of the unfavorable terms, borrowers pay more over time than they would via other lending options.
Today, no-doc loans have more consumer protections than they did in the past, but make sure you work with a reputable lender.
Regardless of the type of mortgage you choose, you should always make sure you understand its terms and conditions, as well as whether you can afford the payments over the life of the loan before signing on.
Key Takeaway Because of the need for a higher down payment and higher interest rates, no-doc mortgages are not typically recommended for most borrowers.
How to get a no-doc mortgage
The process to get a no-doc mortgage depends on the borrower and the exact type of loan you’re after. Typically, you’ll need a higher credit score—often 700 or higher—to secure a no-doc mortgage.
You might also need to make a significant down payment of at least 20-30%, depending on the loan.
While you might not need as much documentation, just like with other loans, you’ll still need to provide some proof to a no-doc mortgage lender that you have the necessary means to buy a home and continue making mortgage payments on it.
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FAQs
What is a no-doc mortgage loan?
A no documentation (no doc) mortgage is a rare loan type that doesn’t require you to verify your income the way you typically need to with a conventional home loan.
Do no doc mortgages still exist?
Because of stricter lending requirements introduced after the 2008 financial crisis, true no doc mortgages don’t really exist anymore, although there are still lending options labeled as “no doc” that require less documentation than is typically required for a conventional home loan.
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