No Documentation Mortgage (No Doc)
A type of reduced-documentation-required mortgage program in which income and assets aren't disclosed on the loan application and employment isn't verified. However, a credit check is typically required as lenders are counting on the fact that the borrower has a good credit history. No Doc mortgages usually fall into the Alt-A classification, and will tend to carry a higher interest rate charge, as well as require a higher down-payment compared to a prime mortgage. Investopedia Says:
In some circumstances, a borrower maybe enticed to use a No Doc mortgage in order to obtain a mortgage which is out of their reach. A borrower should not be persuaded by a lender or mortgage broker to use a No Doc mortgage in order to obtain something that is unaffordable or when a more traditional mortgage is reasonably available at a lower interest rate.
A possible use of a No Doc mortgage is by a business person who is moving their business from one community to another, and currently has no income and no assets that can be documented or verified. Related Terms:
Alt-A
Alternative Documentation
Credit Risk
Liar Loan
Low / No Documentation Loan
Mortgage
No-Ratio Mortgage
Subprime Loan |