Low Loan Information

Understanding low loans

Introduction

A low loan is also known as a no documentation loan. It is a type/category of loans that belong to an ALT-A sector of mortgage loans that gives the borrower an ability to state a limited amount of information on the mortgage application. This kind of loan is offered to applicants who cannot qualify for normal loans or do not wish to disclose their financial status. Applicants require to have a large equity deposit or huge savings. The ALT-A mortgage loans depend on the applicants credit score (FICO score) and the mortgage loan to value ratio (LTV) when deciding the applicants ability to repay the loan. Things like the applicant’s limited income, employment details, and asset details may not be necessary but it depends with the type of low loan applied for. There are noticeable differences between the various types of low loan documentation offered by the different mortgage providers. However, low loans tend to have higher interest rates than normal loans where the income and assets are listed and verified as security. Low loans are faster and easier to apply.

Types of low loans

There are three main types of low documentation loans. They include the following;

• Stated income loan: This type of low loan is mainly for the people who are self employed or those that earn their income through commissions and tips. The basic requirement for this type of low loan is a profit an loss sheet, tax returns and a bank statement belonging to the applicant.
• No ratio loan: This low loan is meant for people with a substantial income, good credit statements or for individuals who are just about to retire. The basic requirements for this type of low loan is to show adequate proof of owned assets like cash in bank, real estates, business investments, bonds ans stocks.
• No income/asset verification low loan: The key and only requirement for is type of loan is a down payment that can range for 5-20% of the loan amount applied for, an applicants credit report  and a property appraisal. In some cases, the applicants work and lenght of specialization is that career may be required. This low loan is best for the people who like to maintain their financial privacy.

Features of low loans

There some features of low loan that an applicant needs to look out for when applying for it. These features include the following:

• No savings history is required: When applying for most loans, some loan lenders ask for an applicants savings statement which they use to determine the applicants financial discipline and responsibility in paying the monthly fees. In low loan applications, this savings statements are not at all necessary to back up your application.
• Maximum 60% loan to value ratio: Due to the increasing restrictions, an individual can only borrow up to 60% loan to value ratio. If for some reason the applicant wants more than the set amount, then he/she will have to produce a BAS documentation.
• Has higher interest rates and establishment fees: In some cases, the interest rates and establishment fees are determined by the amount of documentation and information that an applicant is willing to give. But generally, low loans have higher interest rates and some types demand a down payment.
• No proof of income is required: Most of the time, when applying for a low documentation loan, an applicant fills an income document that indicates his/her earnings and that all.

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