How to Get a 30-Year No-Doc Mortgage: 5 Easy Steps

Investing in real estate is a thrilling endeavor. Whether you are a seasoned investor or buying your first rental property, the question of financing is always significant. Especially with the shifting market and rising interest rates, financing property purchases can be a complex process. Before diving into the five easy steps to getting a 30-year no-doc loan, let’s take a look at what exactly this type of loan is and who might benefit from it.

A no-doc or no-documentation mortgage is a loan wherein the lender does not require the borrower to supply any income verification. Mortgage lenders typically ask for proof of income in the form of pay stubs or tax documentation, but a no-doc mortgage relies on a declaration or promise that the borrower can, indeed, afford the loan payment amount.

While no-doc mortgages were fairly common 20 years ago, today, it is rare to find a loan that requires zero proof of income. Generally, the no-documentation term refers to no traditional documentation, such as a tax return, W2s, pay stubs, or a letter of employment. No-doc loans, however, simply ask for a statement of declaration from the borrower that affirms their ability to repay the borrowed amount.

These loan types usually require a larger down payment, and the accompanying interest rates can be higher than those of a traditional mortgage. A traditional mortgage requires the borrower to submit extensive paperwork to prove their income, credit score, employment status, financial history, and resources, all of which require a staggering amount of documents.

On paper, lenders may view no-doc loan borrowers as riskier than traditional borrowers because of this lack of paperwork. Before the Great Recession of 2008, lending requirements were much less stringent, and “no-doc” really meant no documents necessary. Today, no-doc loans might instead be called low-doc, or no-income-verification loans, as they do require some documentation of funds, just not the mountain of paperwork associated with traditional mortgages.

No-doc loans can benefit buyers who do not have traditional careers or payment information. For example, someone with money in the bank who does not work, freelancers, small business owners, self-employed workers, and anyone who does not receive typical W-2 income could benefit from a no-doc loan. Small business owners and self-employed individuals may be capable of repaying a more substantial mortgage than their documentation reflects because of tax deductions associated with their business. However, if this buyer were to apply for a traditional mortgage, with the income shown on their W-2, the information available to the lender would suggest a much lower amount. Entrepreneurs with good credit who take a small income and reinvest most of their assets back into their small business are considered good candidates, as are real estate investors who may not show substantial net income once they have claimed depreciation expenses.

In short, yes. Real estate investors can be excellent candidates for no-doc business loans. It is possible for property investors to obtain no-doc loans for investment property based on the projected rental income of the rental property they are purchasing. No-doc loans tend to be more difficult for first-time home buyers or those interested in buying a second home, but real estate investors can be a perfect match.

Once you have identified yourself as an ideal candidate for a no-doc mortgage, obtaining one can be done in a few easy steps.

The quality of your lender directly affects the quality of your loan. Working with a top lending company ensures a smooth, easy loan application process and significantly cuts down on the stress these tasks can cause. A first-rate lender will help you get the best loan match for your needs and the lowest terms possible. They will act as a trusted advisor along the way.

Remember, just because no-doc loans do not require piles of paperwork doesn’t mean the lender will not check into your finances. As with a traditional mortgage, no-doc loan lenders will check your credit score, so get ahead of the game by checking it regularly yourself. Reviewing your credit report on a regular basis allows you to check for any discrepancies, dispute any errors, and generally keep an eye on your financial health. Staying up-to-date with your credit report also means you are ready whenever you choose to apply for a loan. No-doc loans tend to require higher credit scores than traditional mortgages, so this is a crucial step in the process.

While traditional mortgages ask as little as 3% for a down payment, depending on your circumstances and which type of loan you apply for (such as a first-time buyer loan), no-doc mortgages require a heftier sum. These mortgages usually require a minimum of 20% as a down payment and are often in the 30-50% range. Lenders want borrowers who inspire confidence in their ability to repay, and they select them by combing through dozens of documents proving the borrower has the resources to repay the loan. This is why traditional mortgages are easier to obtain – what you save in interest rates and cash down, you pay in time, frustration, and endless documents to submit. No-doc loans do not require that endless paperwork, and borrowers essentially pay for that convenience in the form of higher interest fees and down payment amounts.

No-doc loans can demand higher interest rates, so the best way to prepare is to expect them and to keep a coffer of cash at the ready for these kinds of expenses. Higher rates come with the territory, and, like the increased down payment amounts, they are a trade-off for waiving the extensive income verification requirements.

This one can seem confusing. After all, you were looking for a no-doc loan, right? Shouldn’t that mean no proof is required? Not exactly. As we covered earlier, the term no documentation is not strictly reflective of the nature of these loans. “Low” documentation is a more accurate descriptor. You will still need to offer some kind of proof of financial resources, such as bank statements, investment property rental records or projections, or a financial assets portfolio.

Are you interested in financing a new investment property and exploring our rental loan program, such as a no-doc loan? Contact Trio Capital today to discuss the financial tools necessary to achieve your real estate goals. We specialize in rental, fix-and-flip, and bridge loans, and our commitment to transparency, integrity, and a relationship-based approach has garnered a loyal clientele. We are happy to serve clients nationwide. Reach out to get started today! 

 

Learn more about our available loan programs: 

Rental Loans

Fix and Flip Loans

Bridge Loans

_{*Header photo courtesy of Shutterstock}