Do No Doc Mortgages Still Exist
In short, yes and no. No, to my knowledge they do not exist formally. However, effectively they very much exist. Allow me to explain. After the financial crash, which began with sub prime lenders imploding followed by many other mortgage lenders going under or having to be saved by the government and the Federal Reserve, mortgage lenders ceased to offer No Doc Mortgages or their sister loans Stated Income Mortgages. This, combined with a significant tightening of lending standards on all mortgages caused the housing economy to come to a screeching halt. Millions of desperate home sellers couldn’t (and still can’t) find buyers who could qualify for the newly tightened mortgage loan requirements.
So as they say in business, where there is a void someone usually moves in to fill it. In this case it was (and still is, at least for the moment… more on that later.) the home sellers as well as commercial property sellers. Now don’t get me wrong, home sellers don’t have formal “programs” for no doc mortgages or stated income mortgages. But actions speak louder than documents and from what I see every day as a private mortgage buyer, a good 90% of home sellers utilizing owner financing are effectively offering these no doc mortgages and stated income mortgages by simply not requesting any real documentation in order to give their buyer a mortgage. On top of that, most of these “mortgage lenders” are also effectively offering No Credit Check Mortgages as they usually don’t even ask for a credit report. So there you have it, no doc home loans, stated income home loans and no credit check home loans all around you. All you need to do is usually (not always) have a 10% down payment and find a home for sale by a desperate home seller. You think there might be a few of them in this awful housing market? Oh, I mentioned above that I would explain what I meant by my comment of “at least for the moment”. The reason I say that is these new “lenders by default” may go away soon is the proposed Dodd-Frank financial bill. There is a clause in it that if it stays in it, it would prevent home sellers (not sure about commercial property sellers) from issuing home loans to sell their home unless the buyer could “qualify” for a conventional home mortgage. I’ll save my opinion of this piece of err legislation, but will say this. Does the term “final nail in the coffin” come to mind? If you want to take advantage of the owner financing out there to buy a home, I suggest you move fast and as the old saying goes, ‘hope for the best but prepare for the worst.’ Good luck.