Alt doc or alt documentation home loan allows people without perfect credit histories to qualify for a mortgage. This type of loan requires just one form of income verification: either a pay stub or bank statement reflecting three months of employment history. But it doesn’t require additional documents such as tax returns.
Alt-doc mortgages did not allow lenders to meet their consumers’ credit obligations because the lender had to rely solely on the borrower’s job history and earnings to determine whether or not they qualified for a loan. Lenders often needed help to approve the loan applications of those who needed to provide more proof of income. These loans became known as “no doc” or “alt doc,” depending on how much information was required to secure the loan.
However, alt-doc loans allowed lenders to meet their consumer debt obligations since they relied on just one data source to verify the borrower’s ability to repay the loan. In addition, some lenders offer lower interest rates than traditional loans.The problem was that many alt doc loans never closed. They failed for various reasons, including high default rates, lack of competition, and poor marketing. As a result, many states banned them entirely, making them unavailable to most consumers.
Brokers can help determine which bank’s have these options available to their clients. While alt-doc loans were once widely available, they are only available in some areas. If a client wants an alt doc loan, ensure the client state has approved this type of loan before applying.