November 18th, 2014 11:54 AM by Taydus Taydus, AHWD, CNE, CRS, GRI
It was only a matter of time and we are now starting to see advertisements for low document and stated income loans.
You can do a low document loan with a credit score as low as low as 680 with 20% down payment but 2.375% will be added to the base rate of 5.625% for a final rate of 8% for a 5/1 ARM with a fee of at least one point origination.
As you can see these new loans are nothing like the LOW DOC loans of the past where borrowers could have bad credit, no income and no down payment and still get a rate that was very close to Market rate.
At the onset you need to be aware that the LOW DOC products that are available today are different from what was available in the past. You need to investigate your options before beginning the search and not simply assume that just because you have 20% down and great credit you can do the LOW DOC and get Market rate.
For example, on a $500,000 home with a 20% down payment the difference in payment would be $656 or approximately 30% more.
The above example is an actual client experience that I had. At first they were appalled by the rate but when they put it in context it is not that bad of a compromise.
There are other products available that are much more aggressive with whom they will lend to but the rates can easily approach 8% or higher.
Information provided by Joe Taydus of Mutual Security Mortgage in Boulder CO. Questions about this LOW DOC option? Please contact Joe directly at (303) 443-5575 or email him at Joe@MutualSecurity.com