Mortgage : Home Loans : Refinance : Home Equity Loans

By Dan Lewis

Small businesses are the pillars of our modern economy. Ironically, the millions of self-employed individuals can have a bear of a time getting financing.

As a self-employed person, you are your own boss and it is great. You set your hours, take home the profits and so on. On the downside, you really don’t fit within the parameters of many financial institutions. This isn’t your fault. They just have a hard time evaluating you.

If you are self-employed and apply for a traditional mortgage, there could be problems. Why? The issue is how to evaluate how much money you make. It can be surprisingly difficult. For years, lenders have tried to do this by asking for copies of your tax returns. Tax returns, however, can be misleading. With fictional deductions like depreciation, they don’t really paint an accurate picture of how much money you are taking home each month or year. As a result, many self-employed people have been rejected for home loans despite pulling in sufficient cash each month.

One solution for the self-employed individual is to consider a No Doc Loan. This loan is also known as the no asset verification adjustable rate mortgage. Amongst mortgage professionals, it is also referred to as the loan of the liar. Why? Well, the name says it all.

A No Doc loan is one of the more unique mortgages on the market. Frankly, it is an oddity. You supply little or no documentation with your loan application. Typically, the only information supplied is your social security number, the address of the property and the amount you want to borrow. The lender then evaluates your credit, the value of the property and approves or rejects your application. As a self-employed person, it is a pretty attractive option since it avoids the income verification problem found with traditional loans.

Before you rush off to apply, you should know there are some downsides to this loan. First, you need pretty decent credit. Second, you may have to put down more than you would expect with a traditional loan. Third, you are probably going to have to pay a point or two on the loan. Fourth, the interest rate is going to be a point or more higher than with a traditional loan. If you can stomach all of this, then there is no problem.

If you are self-employed and tired of dealing with traditional mortgage lenders, you have an option out there. The No Doc loan is made just for you, if you can afford it.

Dan Lewis is with Great Western Mortgage - providing San Diego mortgage loans to people with good and bad credit.

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This entry was posted on Wednesday, January 24th, 2007 at 6:35 pm and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.