No-doc mortgage: What is it and can you still get one?

Applying for a mortgage involves a small mountain of paperwork, including bank and tax statements, pay stubs and proof of employment. If your income is irregular, though, or you lack some of the standard documents of a typical full-time employee, you might not be able to provide that documentation. In this case, you could be a candidate for a no-doc (short for “no documentation”) mortgage — a type of loan that doesn’t require the usual verifications.

What is a no-doc mortgage?

A no-doc mortgage — also referred to as a no-income verification mortgage — does not require a lender to verify how much you earn with pay stubs and W-2s. These types of loans are also sometimes called NINJA mortgages, which stands for no income, no job or assets.

“It’s an option that has existed for decades,” says Greg McBride, chief financial analyst (CFA) at Bankrate. “During the housing boom [of the early 2000s], though, this previously niche product came into contact with mainstream borrowers. That was a breeding ground for the problems that led to the housing bust.”

In the years leading to the financial crisis of 2007-09, no-doc mortgage loans tended to be offered by subprime lenders, not major financial institutions, McBride says. However, due to the complexities of the finance industry, even the biggest banks wound up with exposure to the risk of failing to verify a borrower’s ability to repay a loan.

Since then, “no-doc mortgages have gone back to being niche products,” says McBride. “They’re probably even more niche than they were before.”

How do no-doc mortgages work?

Historically, any no-doc home loan operated on a bit of an honor system: The borrower would state their income without providing paperwork to back up their claim. The lender still reviewed their credit history, but they took the borrower at their word on how much they earned.

The government has since addressed that with what’s called the ability-to-repay rule. In short, under this rule, a lender must figure out if you can actually pay back a mortgage.

“You generally cannot rely on what consumers orally tell you about their income,” the Consumer Financial Protection Bureau (CFPB) explains in its handbook for mortgage lenders. “You must verify a consumer’s income using documents such as W-2s or payroll statements.”

However, the CFPB offers flexibility for documenting how a borrower can repay. For example, a lender could use bank or other financial statements that highlight the borrower’s assets or investment income.

Who qualifies for a no-doc mortgage?

You might qualify for a no-income verification mortgage if you do not receive regular paychecks but you do have plenty of income or assets. This product only applies to a select few, though.

“These are not something available for your typical middle-class or upper-middle-class borrower,” says McBride. “It’s an offering for a high-net-worth individual with rather unique circumstances, such as an entrepreneur who runs a successful start-up and has plenty of equity in the company.”

Types of no-doc loans

No-doc mortgage loans come in different forms, and the best no-doc mortgage lenders each have their own requirements for this type of financing. To give you a broad overview of how your no-doc home loan could work, here are a few examples:

• No-income, verified-assets (NIVA) loans: With this kind of asset-based lending, the lender verifies your ability to repay with your liquid assets (like stocks or a retirement account).
• Bank statement loans: This route means using your past bank statements to prove your income rather than pay stubs and W-2s. This generally makes sense if you’re self-employed or otherwise aren’t receiving a traditional paycheck.
• No income, no assets (NINA) loans: These types of loans usually lean on rental property income to verify that you’ll be able to repay the loan. If you’re a real estate investor buying a three-unit rental property, for example, and the rent from two units will be sufficient to cover your mortgage payment, a NINA lender may be willing to extend financing to you.

No-doc mortgages vs. conventional mortgages

A no-doc home loan has the same benefit as conventional mortgages and other types of mortgages: It helps you borrow the money you need to acquire a property. Once you get the loan, it functions in the same way as a conventional mortgage, meaning you repay what you borrowed plus interest on a set amortized schedule.

However, the terms and credit requirements needed to get approved for a no-doc mortgage are different. Simply put, no-doc mortgage loans require higher credit scores and larger down payments than conventional mortgages do.

Even the best no-doc mortgage lenders also tend to charge higher interest rates. Why? Because a borrower who lacks full concrete evidence of regular earned income appears less creditworthy and loaning to them carries a higher risk of default.

Pros and cons of no-doc mortgages

Like just about any type of loan, a no-doc mortgage comes with benefits and drawbacks to consider:

Pros

• A no-doc home loan can make it possible for someone without a consistent paycheck to buy a home.
• You can potentially get approved faster because these loans require less paperwork to submit and verify.

Cons

• Few lenders offer these loans in 2024.
• You’ll need a good credit score and lots of liquid assets to qualify.
• No-doc mortgage loans usually come with higher interest rates.

Should you get a no-doc mortgage?

Because a no-doc mortgage will likely come with a higher interest rate, you should only explore this option if you can’t qualify for a traditional mortgage. Many lenders will work with self-employed borrowers to verify their income in alternative ways, which could mean you don’t need to get a no-income verification mortgage — and pay more in the process.

Where to find a no-doc mortgage today

While no-income verification loans do not exist in the same quantity — or even in the same form — as they did pre-Great Recession, there are some no-doc mortgage loans available, and they are part of a larger bucket of non-qualified mortgages.

You won’t find these products widely advertised, though, and if you’re hunting for the best no-doc mortgage lenders, you’ll find slim pickings. In fact, all of the major banks contacted for this article indicated they do not offer this type of loan. You’re more likely to find them through a portfolio lender, and in some cases, they might be referred to as a bank statement loan.

Alternatives to no-doc mortgages

If you’re worried about proving your income due to your status as a self-employed individual or working for tips, there are other routes to qualifying for a conventional loan. It won’t be a no-doc situation, though; you’ll need to hand over some documents to get a mortgage if you’re self-employed.

“In the absence of regular paychecks,” says McBride, “a proven income stream via tax returns is the way that many self-employed individuals and business owners qualify for mortgages.”

There’s just one catch: Those tax returns need to provide compelling evidence — a challenge if you’re focused on maximizing deductions. “The problem is that some business owners run those businesses at a loss,” says McBride. “If it’s a loss for tax purposes, it’s a loss for loan qualification purposes, too.”