The following is a list of documents generally required when applying for a
For a fast and easy loan process, have these items available when you're ready to
complete your application.
- Proof of income - You'll usually be required to show original pay stubs for the last 30
- Copy of homeowners insurance - This is to verify that you'll have sufficient coverage
on the property.
- Copies of your W-2 forms - Required for each applicant. This will help your lender
verify employment and income history.
- Copies of asset information - This includes any accounts where money may come for
closing. You may need to provide statements for your savings, checking and 401K accounts;
as well as investment records for any mutual funds or stocks.
- Copy of title insurance - This will help your lender verify the legal
description of the property, the taxes, and the names on the title.
Once you've begun the loan process, your mortgage banker will let you know exactly
what remaining documentation you'll need to get approved. Keep in mind - the more information
you have ready before you apply, the faster your loan will be approved.
The Three Main Types of No Doc & Low Doc Loans
- No Doc Loans -
No Doc loans require the least amount of documentation and are for buyers with good
credit. The buyer provides minimal information and the lender does the rest. No Doc
loans are great for people who want maximum privacy.
- Stated-Income / Low Doc Loans -
Stated-Income, or Low Doc loans, are a good option for people who work on a cash or
commission basis - people who don’t draw a regular salary. The borrower will need
to disclose earnings, usually for two years, and might need to show tax returns
and bank statements.
- No Ratio Loans -
No Ratio loans are for borrowers who do not wish to disclose their income;
therefore there is no debt-to-income ratio for the lender to consider. The
No Ratio borrower has good credit and abundant assets that make up for the
lender not considering the borrower’s income information. This loan can
offer a quick and easy process to borrowers for whom gathering documentation
may present it self as an impractical exercise.
If you think a No Doc or Low Doc loan is right for your situation, call
us immediately and we can help you further understand your options.
Interest Only Loans
An interest-only loan is one that gives you the option of paying just the interest or
the interest and as much principal as you want in any given month during an initial
period of time. Interest only loans can be 30-year fixed-rate mortgages or
adjustable-rate mortgages. Most lenders offer home loans that are
interest-only for the first three, five, seven years or more.
If you choose to make the interest-only payment, your monthly payment will be lower
than it would be with an interest and principal payment. Your interest rate may or may
not be lower than a traditional mortgage, but you will have the option of flexible
payments. Interest-only loans allow you to control your payment amount and your cash
flow in any given month during the interest only period.
Who Is an Interest-Only Home Loan For?
There are good reasons to consider an interest only loan. For instance, it might
make good financial sense. Here's how: On a traditional 30-year fixed-rate mortgage,
roughly 70% of the payment goes toward interest during the first six or seven years
of the loan. If your interest rate is low, then you've borrowed money at a good rate.
Instead of paying down that low rate loan, you could take the extra money you'd have
each month from making interest-only payments, and invest it in something that would
bring you a higher rate of return. Or, you could pay down higher interest debt like
credit cards. Depending on your loan amount, you could have access to thousands of
dollars over the course of several years to invest or reduce high interest debt.
An interest-only home loan may also be a good option for people who expect to be
in their homes for less than ten years. The average homeowner stays in their home
between five and seven years. As mentioned before, mortgage payments are mostly
interest for the first years of the loan. Many homeowners like the option of
making interest-only payments and using the extra money as they please - save
for college tuition, make home improvements.
Misconceptions About Interest-Only Loans
A common misconception is that if you're not paying down your loan's principal, you're
not building equity in your home. Not necessarily true. Homes in the U.S. have been
appreciating between 5 and 6% a year or in some places at a much higher rate. Chances
are that even if you're not paying down your principal, you're building equity in
your home through appreciation.
Is an interest-only home loan right for you? Click here
to contact us for more information.