By Wendy Clay on November 5, 2011
.jpg.aspx?width=75&height=75) A no document home equity loan is one of the three types of no income verification home equity loans which are also called second mortgages. No document home equity loans, which are also referred to as no income/no asset verification loans, require the least documentation of all three types of no income verification loans. In order to obtain this type of loan all a person must submit is their name, social security number, credit score, a down payment, and occasionally details about their job to prove their employment.
Of these five items, the credit score is the most important as it determines both the interest rate for the loan as well as the amount of further documentation that the lender will request. Generally, the higher the credit score is the lower the interest rate and amount of documentation required. The amount a person may borrow with such a loan is based on their home’s equity, but in general, the amount is no more than 75% of the equity value.
Because of the small amount of paperwork required, no document home equity loans prove to be easy loan options for those who work on commission, are self-employed, or simply desire a quick way to obtain money, but before obtaining one there are a few issues one must consider. First, no document home equity loans automatically have higher interest rates than loans for which documentation is required. In addition to this, there are many lenders that frequently charge higher rates than the norm; if you decide to obtain a no document home equity loan, be sure to check the interest rates of multiple lenders as well as their credibilities. Also, no document home equity loans fall under the category of secured loans with the collateral being your home. This means that if you are unable to make payments on time, you could possibly lose your home to foreclosure, so this is not an agreement to be taken lightly.
Finally, you will only be capable of taking out such a loan if your property value exceeds the principal of your mortgage payment, so this is something that you will want to look into before applying for the loan. Overall, a no document home equity loan can be good a loan option if you are capable of paying the higher interest rates.
Sources:
Home Equity Line of Credit No Income Verification. Information About Loans, 2011. Web. 5 Oct. 2011 <http://information-about-loans.com/line-of-credit/home-equity/home-equity-line-of-credit-no-income-verification.html>.
No Income Verification Loans. 2011. 5 Oct. 2011 <http://www.omniglot.com/onlineinfo/jlon/no_income_verification_loans.html>.
What Is Home Equity? wiseGEEK, 2003-2011. Web. 5 Oct. 2011 <http://www.wisegeek.com/what-is-home-equity.htm>. |