This is a type of loan, which requires the borrower to only state the income (called self verification). No or very little financial documentation is needed to apply for the loan.
Typically, these no doc home loans are suitable for self-employed applicants or borrowers who cannot proof the ongoing income. However, the lender will charge higher interest rate on these funds.
In addition to higher interest rates, the borrower will be asked to pay higher fees ('risk fees') and have a superb credit history. Also, lenders will offer only 60%-80% of the property value, which serves as the loan security.
In some States of USA, the no doc home loans (or low doc home loan) are illegal. Simply put, there is a suspicion that borrowers will acquire properties with money which is not declared for tax.
This is a variation of the no doc home loans, where applicant provides some financial information but not all. Depending on the amount of the income proof, the interest rate and the fees are subsequently reduced.
Low doc home loans are the preferred option. Many, tradesman have honest profit and loss statements but miss some slips.
Also, the financial situation forces self employed businesses to offer cash only services. The process of income recording is often cumbersome. Therefore, low doc home loans can help these borrowers to get that dream house.
The loan value ratio (LVR) is the percentage of the property value you intend to borrow for low doc home loan. Most lenders will not offer more than 80% of LVR.
In certain circumstances you can borrow 95% of the home value.
However, this will lead to much higher interest rates and fees. Generally, do not expect to pass beyond 60% of LVR. The lending institution carry high risk on these loans and the purchased property is the only security they get.
Generally, banks do not offer no doc home loans.
In some cases, these institutions will provide low doc home loans (eg. BankSA).
However, you will need to explain why the income documentation is not available. For banks today, the high prices of properties do not bring quick and secure returns in the near future.
Therefore, even with a loan of 60% the house value, high interest rates and the high fees the property is not an easy security for the finance. Thus you need to shop around.
Lending companies and mortgage brokers are the best options to obtain the low doc home loan. RAMs, XINC, FreedomLoans. MrMortgage and even Aussie do specialise in these types of finances. You can obtain this information from internet, mortgage broker or just pop-into these lending institutions.