Low document loans are different from no document loans. With low document loans, the applicant is required to state income and employment history. In this situation, the applicant may supply recent paycheck stubs or income tax returns for the past two years. These loan programs are advantageous for self-employed or contract workers. Moreover, individuals who receive cash payments can get a low document refinance loan.
Benefits of No Document Refinance Loans
Obtaining a no document refinance loan is ideal for individuals who want to maintain their privacy. Some people are hesitant to offer lenders detail information about their employment, income, and finances. While lenders are not always thrilled to approve loans with little or no documentation, they reason that an applicant with an excellent credit history is less likely to tarnish their perfect record. Thus, they become an ideal candidate for a no doc loan.
Pitfalls of No Doc Refinance and Mortgage Loans
While no doc and low doc mortgage loans involve a speedier process, be prepared to pay a higher interest rate on your home loan. If privacy and speed is a main factor, a higher rate may not be a major drawback. However, if your primary reason for refinancing is to obtain a lower interest rate on your mortgage, a no doc refinance may not be the best option. Before refinancing, get a quote from a lender and compare the no document refinance rate with your current interest rate.