Low / No Documentation Loan

AAA

DEFINITION of 'Low / No Documentation Loan'

A category of loans which generally fall into the Alt-A sector of mortgage lending that gives borrowers the ability to state a limited amount of information on their mortgage application. Limited income, employment or asset information may be required depending on the specific type of low documentation loan; however, in some cases, the borrower may not need to provide them at all. There are subtle differences between various low documentation and no documentation loan programs offered by mortgage lenders.

INVESTOPEDIA EXPLAINS 'Low / No Documentation Loan'

Alt-A mortgage lending typically depends heavily on a borrower's credit score (FICO score) and the mortgage's loan to value ratio (LTV) in determining the borrower's ability to repay the mortgage.

A borrower should not be steered to a low documentation or no documentation loan by a mortgage lender in order to speed up the loan application and approval process. Low and no documentation loans usually have a higher interest rate than what can be obtained when income and assets are listed and verified. A little work in gathering information can save a lot of money over the long-term.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Loan

    The act of giving money, property or other material goods to ...
  3. Stated Income / Stated Asset Mortgage ...

    A type of reduced documentation mortgage program which allows ...
  4. No Income / No Asset Mortgage - ...

    A type of reduced documentation mortgage program in which no ...
  5. No-Ratio Mortgage

    A mortgage program in which a borrower's income isn't used or ...
  6. No Documentation Mortgage - No ...

    A type of reduced-documentation-required mortgage program in ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  3. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  4. Home & Auto

    6 Questions To Ask Before You Refinance

    Refinancing your mortgage can be a quick way to save on payments, but it's not for everyone.
  5. Options & Futures

    Self Employed? 5 Steps To Scoring A Mortgage

    Convince lenders that you're a good bet despite your lack of a steady income.
  6. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Credit & Loans

    How To Become a Mortgage-Backed Securities Analyst

    Specializing in structured or derivative credit products like mortgage-backed securities requires education and prior experience in the mortgage field.
  8. Investing

    3 Major Risks For Annaly’s Investors

    Thanks to its double-digit dividend yield, Annaly Capital Management has long been a favorite among income-seeking investors.
  9. Investing

    Ready To Invest In Financial Leverage Funds?

    Whenever you invest in a leveraged financial fund or are thinking about doing so, it's important to know the risks that could weigh on its returns.
  10. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center