No Document Mortgage—Yes, It Has Always Been There
No Document Mortgage—Yes, It Has Always Been There
Not long ago, getting a mortgage was as easy as going to a bank, signing some paperwork, and walking out with the loan. This practice of issuing mortgages led directly to the credit crunch of 2007, which devastated the economy. Subprime mortgage loans are still in use today, and they're responsible for a lot of problems for borrowers. People got behind on their mortgage payments and the foreclosure rate increased dramatically due to soaring interest rates and other problems. At the same time, another form of subprime lending emerged: the no-doc mortgage. Please tell me what this mortgage is.
The term "no doc mortgage" refers to a certain kind of mortgage that can be approved without the need for income verification paperwork. A person's credit score and their seeming capacity to repay the loan were sometimes the only criteria used to provide these kinds of mortgages. Many individuals were given these for free, and they gave them the chance to own a home even if their income was modest. Some folks took advantage of a great chance that is still paying dividends for them today.
Anyone who is self-employed, for instance, could qualify for a no-doc mortgage. When they fill out their tax returns, many business owners don't necessarily reveal a healthy profit. Their tax preparation is not dishonest; rather, they simply employ a modicum of imagination each time they look at the figures. Maybe they deduct every conceivable expense, leading to a year of zero or very little revenue. Despite having the financial means to repay the loan, these borrowers were unable to be approved for a traditional loan due to their tax filings.
Very few businesses will give you a no-doc mortgage, which is bad news for everyone. This is particularly true for people who have the money but can't prove it. The present economic slump has hit most lending institutions hard, so they are hesitant to take a stand. So, to get into a home right now, you might have to seek out alternative financing options.
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