Category: glossary by H. F. From Lille, France
"low / no documentation loan " is A category of loans which generally fall into the Alt-A sector of mortgage lending that gives borrowers the ability to state a limited amount of information on their mortgage application. Limited income, employment or asset information may be required depending on the specific type of low documentation loan; however, in some cases, the borrower may not need to provide them at all. There are subtle differences between various low documentation and no documentation loan programs offered by mortgage lenders.
Alt-A mortgage lending typically depends heavily on a borrower's credit score (FICO score) and the mortgage's loan to value ratio (LTV) in determining the borrower's ability to repay the mortgage.
A borrower should not be steered to a low documentation or no documentation loan by a mortgage lender in order to speed up the loan application and approval process. Low and no documentation loans usually have a higher interest rate than what can be obtained when income and assets are listed and verified. A little work in gathering information can save a lot of money over the long-term.