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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Low-documentation Loan


Synonyms:low-doc loan, low-doc mortgage, low-documentation mortgage
Filed Under: financial-banking, legal-contracts, mortgages
Tags: banking, contract, legal, mortgage
 

Definition of low-documentation loan

low-documentation loan
1. A mortgage that requires less verification of income or assets (or both) than a conventional loan. Low-documentation loans are designed for the entrepreneur or self-employed, for recent immigrants with money in foreign countries or for borrowers who cannot or choose not to reveal information about their incomes. You need a substantial down payment, excellent credit history and will usually pay a higher interest rate.

Related Terms and Acronyms:

  • creative financing   An innovative or unusual way of structuring a home loan that allows the buyer to buy the house.
  • credit rating (CR)   A judgement of a person's ability to repay debts. The rating is often based on a person's current and projected income and past debt payment history. Also called a credit score.
      ➥  A metric to measure the credit worthiness of a debtor.
  • document needs list   An inventory of papers a lender needs to underwrite a loan, usually including pay-cheque stubs, bank statements and tax returns.
  • full income verification   A requirement for fully documented proof of income; loans of this type usually offer lower interest rates than no-income or "no-doc" verification loans.
  • loan application   A document in which a prospective borrower details his or her financial situation to qualify for a loan.
  • no credit history   To have no record of an individual's credit worthiness.
  • no-documentation loan   A mortgage in which the applicant provides a minimum of information -- name, address, Social Insurance number (so credit reports can be pulled), and contact information for an employer, if there is one. The underwriter decides on the loan based on the applicant's credit history, the appraised value of the house and size of down payment.
  • private lender   A lender not associated with a traditional lender.
  • resident alien   A person who is a legal permanent resident, but not a citizen, of Canada.
  • verification of employment (VOE)   Confirmation that a loan applicant is telling the truth about where he or she works and how much he or she makes.

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