Articles
No doc' loans help self-employed
Just because you've just quit your job and have decided to
go into business for yourself and you can't document your
income doesn't mean you can't get a new mortgage or
refinance your existing one.
In this highly diversified mortgage environment, there are
an increasing number of lenders who are willing to write
what they call "no doc" or "low doc" mortgages. Some of
these lenders allow borrowers simply to "state" their income
by filling in a blank on an application form. Some don't
even require any information from the borrower about income
or assets.
"My prime candidate is someone who is an employee who has
W-2 wages or salary but who has not been at his or her job
very long and cannot prove long-term income," said Edie
Jerome, president of Palatine-based Metro Mortgage Services
Inc.
"Another prime no/doc-low/doc candidate is a self-employed
borrower who owns his or her business but doesn't show
income on a tax return," she added.
Jerome noted that a key to obtaining one of these mortgages
is solid credit history. "The better your credit, the more
likely you will not only get your low/doc mortgage but you
will get it at a better rate," she said.
She gives an example of a recent client who was able to
obtain such a mortgage. "She was going through a divorce and
had no income, although she had a job," said Jerome. "She
was a prime candidate because she didn't have to prove
assets, and she got a very good rate.
"However, she had perfect credit," Jerome added.
An important feature of the low doc/no doc mortgage must be
emphasized: Its rate is higher than market rates. Jerome
pointed out that the "good rate" she was able to get for the
woman going through the divorce was 1 percent above the
market rate.
"People who are credit challenged pay even higher rates and
often have to pay points of as much a 4 percent or more,"
Jerome said.
There are no doc/low doc home equity products on the market,
but these are more rare than first mortgages, according to
Jerome.
"You usually need a higher credit score, and if you are
credit challenged you might have to pay as many as four
points or more in closing costs," she said.
So even though you can get a mortgage without having to
produce the usual documents, you generally have to produce
more money for these unconventional loans. James T. Berger
is a Chicago-area free- lance writer who teaches marketing
at Northwestern University.
Copyright 1999
Provided by ProQuest Information and Learning Company. All
rights Reserved.
