In the world of mortgage lending many have become accustomed to the thoughts and nightmares of mountains of paperwork and endless questions about your ability to qualify for the loan. Is it really true that getting a mortgage involves hours upon hours of gathering every detail about your life through documentation? You'll be relieved to find out that the short answer is 'No'! Many brokers and lenders offer low document mortgage refinance options all the time, but is it really for you?

You should understand that the more documentation you provide (employment, income, and credit history), the lower your rate will be. However, many home owners opt for a higher rate because a low documentation loan can be easier and offer more privacy to the applicant even though they may have a healthy employment, income, and credit history.

Most borrowers who opt for a 'No' or 'Low Doc' loan often are business owners with fluctuating income or employment history which may be difficult to document the source for the lender. Many self-employed applicants are also known to write-off a lot of their expenses which also makes their income appear to be lower than what they are actually making. This is where the 'ease' of obtaining a low document mortgage refinance becomes very attractive. One rule of thumb is that if you do opt for this type of mortgage, your interest rate can be a half-point higher or more than someone who fully documents their qualifications.

Another prime example of when a low documentation loan may be right for you is if you are employed in a line of work that pays 'cash' only or a large part of your income is paid in cash that you may not be able to fully document via traditional methods.

One the most common low documentation loans available is known as the Stated Income loan. In this scenario, the applicants will simply 'State' their income on the loan application without actually providing any documentation that verifies those amounts. Even though some information can be simply stated, other information such as your overall debts will need to be examined to determine your debt-to-income ratio.

This loan can be easy to obtain, however it is advised that the applicant always give truthful and accurate information as the lender will almost every time ask you to sign a document that will allow them to legally inquire with the IRS to verify your income tax filings should you default on the loan for example. There may be variations to this loan, which means that you may have to document more or less items so speaking with a qualified mortgage professional is always advised.

In the end, a low document mortgage refinance loan is a great option for applicants who have trouble documenting their income which typically involves self-employed persons who show on their income taxes less money than they actually make. Don't forget that if you are also someone who works in an environment where you receive the bulk of your income in cash such as tips and other bonuses, then a 'Low Doc' mortgage may be right for you. The key to remember is always be truthful and accurate during the application phase as the information you do reveal will greatly affect the terms of your loan.

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