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.

BREAKING DOWN '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. Origination

    The process of creating a home loan or mortgage. During the origination ...
  2. 100% Mortgage

    A mortgage loan in which the borrower receives a loan amount ...
  3. Stated Income / Stated Asset Mortgage ...

    A type of reduced documentation mortgage program which allows ...
  4. Alt-A

    A classification of mortgages where the risk profile falls between ...
  5. Alternative Documentation

    A documentation process designed to expedite loan approval where ...
  6. Liar Loan

    A category of mortgages known as low-documentation or no-documentation ...
Related Articles
  1. Personal Finance

    What Is an Alt-A Mortgage?

    Called "liar loans" for their low documentation requirements, Alt-A mortgages were hot until the subprime crisis. Now Wall Street wants to bring them back.
  2. Investing

    Financing Basics For First-time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  3. Personal Finance

    Finding the Best Mortgage Rates in 2017

    As home-buying technology has progressed, the process of finding the best mortgages rates can all be done online. Here's how:
  4. Personal Finance

    Reduce Interest With An All-In-One Mortgage

    "Offset" mortgages combine a checking account, home-equity loan and mortgage into one account.
  5. Investing

    Back to the Future: AAA Bonds Backed by Risky Debt

    Bonds backed by risky mortgage loans received AAA ratings by two ratings agencies less than ten years after the subprime crisis
  6. Personal Finance

    Mortgage Company

    A company engaged in the business of originating and/or funding mortgages for residential or commercial property.
  7. Personal Finance

    How to Find the Best Refinance Companies

    From traditional lenders to online loans, here's everything you need to know about refinancing your mortgage.
  8. Personal Finance

    Conventional Mortgage

    A conventional mortgage is any type of homebuyer's load that is not offered or secured by a government entity but rather available through a private lender.
  9. Retirement

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  10. Personal Finance

    How to Shop For Mortgage Rates

    A step-by-step guide to finding and locking in the best rate for a mortgage.
RELATED FAQS
  1. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  2. What’s the Difference Between a Mortgage Lender and a Mortgage Servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  3. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  4. How do construction loans work?

    Construction loans are obtained either by the prospective home owner or the actual builder. There are two types of construction ... Read Answer >>
  5. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
Trading Center