What Is a No-Doc Mortgage and Is It Still Available?

What Is a No-Doc Mortgage?

A no-doc mortgage is a home loan that doesn't require borrowers to provide standard income verification documents like pay stubs or W-2 statements. Before the housing market crash of 2008, would-be borrowers could tell a lender their income when applying for a no-doc mortgage, and the lender would take their word for it.

However, failure to adequately review a borrower's ability to repay their mortgage left many Americans with loans they couldn't afford and is one of the factors that fueled the subprime mortgage crisis in the early 2000s. Since then, no-doc mortgages have been much more difficult to find, but they do still exist today.

How No-Doc Mortgages Work

Today's no-doc mortgages are non-qualified mortgages (non-QM), which means they're not subject to the same ability-to-pay rules as qualified mortgages. Despite their name, most of today's "no-doc" loans typically require you to provide some type of documentation, such as bank or investment statements, showing you can make your loan payments—even if you don't have pay stubs or W-2s.

Types of No-Doc Mortgages

Lenders may offer different types of no-doc mortgages to potential homebuyers. The one that's right for you depends on your individual situation. Here are several you may come across.

• Stated income, verified asset (SIVA) loans: Lenders review bank statements rather than pay stubs or W-2s to confirm that you have a source of income to repay your loan.
• No income, no asset (NINA) loans: With a NINA loan, lenders don't verify a borrower's income or assets. These types of loans are typically only available to real estate investors, and lenders use the property's projected rental income to determine whether an applicant will be able to make their loan payments.
• No income, verified asset (NIVA) loans: Instead of using your income to verify that you can make your loan payments, lenders review assets you could use to make your payments.

No-Doc Mortgages vs. Conventional Mortgages

No-doc mortgages differ from conventional mortgages in several key ways, including how the lender verifies income, credit criteria, down payment requirements and loan rates. Here's a breakdown of the two types of mortgages.

Pros and Cons of No-Doc Mortgages

While no-doc loans are harder to come by than they used to be, getting one is still possible if you meet the lender's requirements. Before deciding whether one is right for you, it's crucial to understand the pros and cons.

Pros

Should You Get a No-Doc Mortgage?

No-doc mortgages aren't right for everyone, but they may be a good option if:

• You're a business owner. Whether you're a solopreneur, serial entrepreneur or small business owner who doesn't receive a regular paycheck, a no-doc mortgage may help you purchase a home. However, it's worth noting that even if you're not traditionally employed, you may still be able to qualify for a conventional or Federal Housing Authority (FHA) loan. Comparing both options will allow you to see which one provides the most favorable terms.
• You have an irregular income. If you work in a job where you earn significantly more at certain times of the year compared to others like seasonal employees often do, a no-doc mortgage may be worth exploring.
• You're retired. Are you living off your investments after years of saving? No-doc mortgages can help you buy a home even without traditional income.
• You're an investor. Traditional income documentation requirements may not apply to individuals purchasing investment properties. If you plan on renting out the property you want to buy, a no-doc mortgage can provide the capital you need to purchase it.

How to Get a No-Doc Mortgage

Finding a lender that offers no-doc mortgages may take some additional legwork. You might have a better chance of getting a no-doc mortgage through a lender that specializes in non-qualified mortgages. If you aren't having any luck finding a lender to help you, consider working with a mortgage broker. Mortgage brokers aren't lenders; they work with lenders. For a fee, a mortgage broker will shop for a home loan on your behalf and may be able to help you find a lender that offers no-doc mortgages.

It's also a good idea to shore up your credit and get your down payment together if you plan to apply for a no-doc mortgage since you'll typically need stellar credit scores and a significant down payment to qualify.

Learn more: Average Mortgage Rates by Credit Score

Alternatives to No-Doc Mortgages

If you can't get a no-doc mortgage or aren't sure it's the right fit, here are some alternatives to consider.

• FHA loan: An FHA loan may be a good option for entrepreneurs or self-employed professionals who earn income through their business but don't have the credit scores or down payment that a no-doc mortgage requires. It may be possible to get an FHA loan even if you're not a W-2 employee.
• Conventional mortgage: Not having a W-2 or a string of paystubs you can show a lender doesn't necessarily disqualify you from getting a conventional mortgage. If you have a source of income, it's worth having a conversation with your lender to see if you qualify for a conventional loan.
• Debt service coverage ratio (DSCR) loans: If you're a real estate investor expecting your tenants' monthly rent payments to cover your mortgage, a DSCR loan may be a good option.
• All-cash offer: Retirees or individuals who have received a substantial inheritance and no longer need to work may consider making an all-cash offer on a property to avoid the need for a mortgage altogether.

The Bottom Line

No-doc mortgages are still available, but they're tougher to find than they used to be. A no-doc mortgage may be worth exploring if you're a real estate investor, high net worth individual with significant assets but no income or business owner. But they're expensive compared to other types of mortgages, and you'll need a strong credit profile and sizable down payment to qualify. Be sure to explore all your options before opting for a no-doc mortgage. There may be alternatives that are a better fit for your situation.

To see where you stand when applying for any mortgage—a no-doc mortgage or otherwise—check your FICO^® Score^☉ from Experian for free. You can see areas that may need improvement to put you in the best position to get approved.