Virginia No Doc Loans: What You Need To Know

Forbes magazine has named Virginia one of the top places to retire due to its low crime rate and suitable housing for those who want to call Virginia their home. 

Virginia is the right state for you if you are looking for an excellent investment location. The economy is booming and is now ranked 13th in state economy by the U.S. News and World Report.

But before you go shopping for real estate in Woodbridge, VA, you should think about financing options for your project.

If you are having difficulty applying for a traditional loan, a no-doc loan is something you should consider.

Experienced real estate investors who take the traditional mortgage route have to submit a ton of documentation which in some instances is hard to produce given the multiple income-earning properties in their portfolio.

Traditional loans also require tax returns which is another hurdle for investors since most of these returns don’t show their actual income, which makes it harder to qualify for a loan or get approved but at higher rates.

No doc loans provide another option that gives investors a hassle-free and more affordable way to finance their next Virginia home purchase.

We share the benefits of no-doc loans, how they work, how to qualify for one, and what you need to know before applying.

What is a no-doc loan?

A no-doc loan is a type of mortgage that doesn’t need income verification. Approval is given based on a declaration that confirms that the borrower can afford to pay for the loan.

No-doc mortgages are ideal for borrowers whose incomes aren’t easily verifiable. People who apply for this type of loan are those who have no regular income source, are self-employed, are house flippers, landlords, temporary workers, or are new immigrants.

How does a no-doc loan work?

When applying for a no-doc loan, you don’t have to submit the required financial documents in traditional loans, such as pay stubs, W2s, and tax returns. This doesn’t mean that no paperwork is needed when you apply for a no-doc loan. Usually, statements are enough proof to show that you can repay the loan.

Contact our loan officers at The Mortgage Option today if you want to work with a no-doc lender in Virginia.

What standard requirements do lenders look for when applying for a no-doc loan?

• To have a higher chance of loan approval, a good credit score is generally required. FICO scores of 700 and above are required compared to a 620 minimum score for most traditional loans.

• You need to put down a larger amount upfront which usually starts at 30% and above compared to 20% or less when you apply for a conventional loan.

• Expect to pay higher interest rates since lenders are taking on a higher risk compared to traditional loans. Rates are based on your middle credit score, LTV ratio, and down payment size. No doc loans may have rates 3 to 5 percentage points higher than traditional mortgages.

• You need to submit proof that you can repay the loan. You can give bank statements, proof of rental income, or proof of assets to show that you can afford to pay for the no-doc mortgage.

• An appraisal will be done to know the home’s value and potential rental income. Rental income must be good enough to cover your monthly mortgage payments. 

• Gift funds are also allowed with no doc loans.

What are the advantages of applying for a no-doc loan?

Real estate investors enjoy tons of benefits when choosing a no-doc loan over a traditional one. Here are some of the advantages:

• Less paperwork and fewer requirements to submit. The loan process is simpler and streamlined for efficiency.

• No need for tax returns and other financial documents. This makes applying for a loan easier and less of a hassle for most investors.

• You can get longer loan terms which can last up to 30 years, giving investors time to build equity and earn profit from the property.

• Your property can be bought as an individual, an LLC, or a corporation, giving borrowers flexibility.

• You can buy various property types up to four units. You can buy a single-family home, condo, or townhouse.

• You don’t need a rental lease to get a no-doc loan.

• You can refinance after three months if market rates drop.

If you are an investor buying in Prince William County, you should look at a no-doc loan for financing. 

Is a no-doc loan the right loan type for me?

• Real estate investors with multiple income streams have complicated tax returns that seldom show their true worth. If you are one of those who file multiple tax returns, a no-doc loan is a good alternative.

• If you are self-employed and your income has decreased recently, you may have difficulty applying for a traditional loan. A no-doc loan allows you to get financing without tax returns showing declining income.

• Freelance workers and seasonal contractors may get huge amounts of money a few times a year. Traditional lenders may have difficulty tracking your income, making a no-doc loan your best option.

• Business owners who make large expense write-offs may push down net income for the year. Since traditional lenders look at two-year financial statements, the low earnings due to the write-off may cause them to reject your loan application.

Need help with financing your next real estate purchase?

If you are a real estate investor or self-employed and have a hard time getting a loan due to a lack of financial documents, a no-doc loan is a good option.

Today’s no-doc loans are safer than the stated income type offered in the past. Lenders comply with federal laws to verify that a borrower can repay the loan with proof of assets or cash flow.

At The Mortgage Option, our loan experts have been actively helping investors finance their projects using no-doc loans. 

To help you get started and enjoy the benefits of a no-doc loan, call or message us for an appointment today.

 

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.