What Is a Low Doc Loan?

Did you know that mortgage lenders issued more than 2 million residential loans during 2022’s first quarter? But some forms of employment make it more difficult to apply for a mortgage loan.

Are you trying to buy a house but can’t apply for a standard loan because of your job? A low doc loan might be the solution to your problem.

The following guide will explain how they work and what advantages they have over other types of loans.

What Is a Low Doc Loan?

A low doc (low documentation) loan lets a potential borrower apply for a mortgage even without giving much or any information. They don’t require information like employment, assets, or income.

Since 2008, a lot of regulations have popped up for those trying to apply for a loan like this. But low-doc loans are still an option for many borrowers who find themselves in uncommon financial positions.

How Do They Work?

Most borrowers who apply for low/no documentation loans don’t make their income through traditional means. So, it’s usually more complicated to document earnings for a standard mortgage application.

For instance, someone that makes income from alternative investments or self-employment. They might report less income to reduce their taxes which makes it difficult to get a loan.

Lenders that issue low-doc loans look at an applicant’s credit score instead of their income. They pay attention to the potential borrower’s ability to make a down payment that’s larger than normal. Sometimes lenders ask to see bank statements as well.

Keep in mind that low-doc loans tend to have very high-interest rates. So, make sure you pay off your loan quickly to avoid spending more money than necessary.

Benefits Compared to Other Types of Loans

Many real estate investors favor low-doc loans because of their quick turnaround. The process is quick and they’re great for both residential and commercial properties. They’re also great for investors residing outside of the US because foreign nationals can apply.

Low-doc loans come with either a fixed rate or an adjustable rate. They’re perfect for those who are self-employed, have equity, and have enough money for a large down payment.

They also require far less paperwork than other traditional types of loans. All you need is a letter from your accountant, a statement from your bank showing any business expenses, and a statement for your business activity.

Many low-doc loans come with rates as low as 4.75% for homes and 4.9% for investments. You can visit for an example of a low-doc lender’s rates and requirements.

Is a Low Doc Loan Right for You?

Now you know what a low-doc loan is, what you need to have to apply, and how they compare to other types of loans. Just because you don’t have a traditional income doesn’t mean you’re out of luck when it comes to a home loan.

Remember this guide and consider applying for a low-doc loan and skip the extra paperwork and requirements for a standard loan. Check out our Real Estate category for even more tips and tricks.

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