No Doc Home Loans

Are you thinking about getting one of many no doc home loans? Do you know what they are good for and what they are not so good for? Here are two situations that no doc loans work well in and one that is a bad idea for this type of loan.

First, if you have good credit, have been working in the same field for at least two years, and have a good debt to income ratio, then there is no need for you to every consider a no doc loan. Your debt to income ratio is the amount of money you make each month compared to all your monthly bills. This needs to be below 30% for you to have a good debt to income ratio. You should be trying to get a conventional home loan that will have a lower rate and benefit you more.

If you are a self employed individual that does not claim all of your income due to expenses and other business related reasons, then a no doc home loan might be right for you. This will allow you not to have to verify your income or employment, but the rate will be a bit higher than a conventional mortgage. Make sure you can afford the loan you are going to take out before you sign anything and if you are not sure, then consult your accountant or financial planner.

Another good situation for this type of home loan is a tipped employee. If you earn most of your income from tips, then you know that it is hard to prove and you probably do not claim all of your income. This is a great situation for a no doc type of home loan that allows you to skip the process of verifying your actual income. You can benefit greatly from this type of loan program.

Now you should have an idea of when no doc home loans are good and when they don't fit the situation very well. Keep this knowledge in the back of your mind and make sure that you are getting the proper loan for your situation or you might end up further in debt than you can handle.