How to get a mortgage with bad credit and little documentation

If you've had credit problems in the past, and you cannot provide sufficient documentation of income and employment status, it is harder for you to obtain a mortgage. But not impossible.

This page:

  • Explains how a no and low doc loans work if you have poor credit

  • Gives a few tips on applying for a no and low doc mortgages

  • Tells you where to go for the best deals on these type of loans

Over the next few pages, we examine all types of bad credit mortgages.

After reading this section, you should be familiar with all your bad credit mortgage options and, hopefully, have chosen one that meets your needs.

No- and low-documentation mortgages for those with poor credit

Lenders are often unwilling to finance mortgages for home buyers who either don't have much credit history (like recent immigrants) or can't show much income (like retirees). Or maybe, for whatever reason, you don't want your personal finances opened wide to the lenders.

If any of these apply to you, you probably want to look into a low- or no- documentation mortgage. Interest rates and fees on these loans may be higher, but in some cases you'll be able to secure a loan with no documents required. If you keep your payments current, you'll probably be able to refinance into a lower rate later on.

Many lenders will require that the borrower sign a waiver allowing them to request recent tax returns from the IRS in order to qualify for this loan. Our recommended "low-doc" lenders do not.

Online application for this type of loan is as fast and simple as it gets. And in today's rate market, even a subprime interest rate is affordable.

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A few tips for no and low-doc loans:

  • Have a good size down payment. This usually means at least 10%. Lenders may be willing to risk a borrower with little credit history, but they are a lot more likely to approve you if you show you're confident enough to invest a fair amount of your own money.

  • Aim for a loan with reasonably sized payments. Lenders don't like "payment shock". That is, they don't want paying a lot more per month on housing (rent or previous mortgage) than you used to. Show them you can handle the new payments, and they'll be a lot happier.

  • Don't provide false information. The most important tip. Even if a lender doesn't require proof of your income, don't lie about it. Knowingly providing false information to a lender can result in an immediate call due on your loan and serious legal problems as well.


Next: 7 mortgage tips for people with bad credit.

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