For someone who has a job that provides them with regular pay stubs and tax information the need for a low doc loan is not intuitive. Why would anyone not be able to produce the necessary documentation to get a loan? If you think about it you'll see that it really shouldn't be that surprising at all. There are many people out there who are self employed or get paid totally in cash. For these people rounding up a stack of paper to document their annual income is not an easy task. But just because you don't get regular proof of income doesn't mean that you won't need to take out a loan at some point. It is for these people that the low doc loan was created.
A low doc loan is simply a loan like any other. The main difference is that instead of submitting your proof of income you sign an affidavit to certify that you have the income you say you do. There may be some other documentation requirements as well but the key difference is that you will not have to produce tax records or tangible proof of income.
When banks and other institutions process low doc loans they are taking on additional risk. As a result they will expect you to pay a little more to borrow the money you need through a low doc loan than they would if you were taking out a conventional loan. Interest rates are typically a little higher on a low doc loan and there will be some additional fees. In the case of a home mortgage loan, you may be required to purchase loan insurance and your low doc loan will likely be limited to 80% of the value of the property.
With all the added costs is a low doc loan even worth it? Yes, if you have a good credit rating and sufficient monthly income to cover your payments but your income is of a type that is not easily verifiable, then a low doc loan can be the right tool for you if you need to borrow money. Some borrowers find that even though they can verify their income the added convenience of a more streamlined application and approval process makes it worth their while to borrow money via a low doc loan over a conventional loan.
You will need to do the same research and take the same precautions you would when taking out any loan. You want to look for the best deal that suits your purposes, check out the company that is offering the loan and, above all, read all the fine print. You need to make sure that you totally understand whatever is in your low doc loan documents. Once you sign these papers you are committing to a contract. Just as you expect your lender to hold up his or her end of the bargain, you are expected to do the same.
The moral of the story is, no matter what your financial situation you can find a loan program that will meet your needs. You just need to shop around and be sure that you know what the details of your loan are.
A low doc loan is simply a loan like any other. The main difference is that instead of submitting your proof of income you sign an affidavit to certify that you have the income you say you do. There may be some other documentation requirements as well but the key difference is that you will not have to produce tax records or tangible proof of income.
When banks and other institutions process low doc loans they are taking on additional risk. As a result they will expect you to pay a little more to borrow the money you need through a low doc loan than they would if you were taking out a conventional loan. Interest rates are typically a little higher on a low doc loan and there will be some additional fees. In the case of a home mortgage loan, you may be required to purchase loan insurance and your low doc loan will likely be limited to 80% of the value of the property.
With all the added costs is a low doc loan even worth it? Yes, if you have a good credit rating and sufficient monthly income to cover your payments but your income is of a type that is not easily verifiable, then a low doc loan can be the right tool for you if you need to borrow money. Some borrowers find that even though they can verify their income the added convenience of a more streamlined application and approval process makes it worth their while to borrow money via a low doc loan over a conventional loan.
You will need to do the same research and take the same precautions you would when taking out any loan. You want to look for the best deal that suits your purposes, check out the company that is offering the loan and, above all, read all the fine print. You need to make sure that you totally understand whatever is in your low doc loan documents. Once you sign these papers you are committing to a contract. Just as you expect your lender to hold up his or her end of the bargain, you are expected to do the same.
The moral of the story is, no matter what your financial situation you can find a loan program that will meet your needs. You just need to shop around and be sure that you know what the details of your loan are.