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What is a No Documentation Loan?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 12 September 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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No documentation loans are loan applications that do not require the usual information needed to process a loan request. With a no doc loan, the borrower does not have to supply information regarding current employment, sources of income, or assets currently in the possession of the applicant. Generally, the no documentation loan requires nothing more than the basic information needed to run a credit check. The information contained on the credit report will determine whether or not the applicant is eligible for a no documentation loan.

When a no documentation loan is requested as a means of acquiring property, the lender normally will also take steps to verify the current market value of the land and any buildings currently in place. Assuming that the credit report indicates that the applicant is eligible to receive the loan, and the property is valued at a price that is equal to or exceeds the requested amount, lenders will normally approve the loan in a very short period of time. This can be very helpful when the applicant wishes to move quickly with the purchase, and does not want to go through the details associated with more traditional loans.

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While the no documentation loan can be a quick and easy way to obtain financing, there is one point that any borrower should keep in mind. It is not unusual for a no documentation loan to carry a higher interest rate than traditional mortgages and loans. While the difference is usually no more than 1.5% higher than the more conventional loan offerings, this can mean a substantial amount of interest paid over the lifetime of the loan.

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