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Home No-Doc Loans Returning?

No-Doc Loans Returning?

The undocumented income or no-doc loans got a bad reputation when the housing crisis occurred. Some borrowers who used the loans misstated and inflated their income, (some with the support from now out-of-business brokers). The loans thus became labeled, "liar loans". But experts say these types and other alternative loans may soon be making a comeback.

Many Mortgage Banker's say there's little appetite for no-doc loans at this time and they aren't sure when these types of loans will return. They do believe they will make a comeback, and could return in as short as six months, because there is definitely a segment of borrowers that can only use this product to help them purchase a home. Because there is definitely a segment of [The loans] will come back at some point; it's just a matter of how fast the economy turns around and how fast we get back to a period when lenders and investors are willing to take on some level of risk.

I have noticed that the self-employed who are actually appropriately qualified are finding that getting a loan is a bit difficult. The no-doc loans have been painted with a broad brush by the media and some political circles as being a nasty product but, but for those of you who are self-employed know, it's the only product you can use to qualify. If you can't wait for the no-doc loans, are unable to to fully document your income and are looking to purchase or re-finance soon, it's important that you go above and beyond to document and prove your credit-worthiness. You should provide contracts, bill payment history, and any tax information you have. The key is to be creative—be active in your attempt to convince the lender that you are a low-risk borrower, in spite of your inability to fully document your income.

Some say the overcorrection to the lending industry has missed the real issue. I believe the elimination of a particular type of loan does not solve the problem. Various types of mortgages are needed to meet the needs of diverse borrowers. The real disaster occurred not because of one type of loan but instead because of a lack of accountability—the lender making the loan wasn't necessarily concerned if the loan defaulted because these risky mortgages were pushed off lenders' books and packaged up and sold to third parties.

President Obama has also proposed a plan to help overhaul the financial regulatory system. This would require lenders to retain a portion of the loans they originate.

* To find out what mortgage products are available to you, please contact Cameron Crossman!

Posted Monday Jul 20