No-doc  programs provide different ways to qualify for borrowers. Some of the programs are great, if you are not able to qualify with a full doc program. These programs are mainly designed for self-employed borrowers.  The no-doc  program has also other names: no income check loans, non-qm loans, stated income loans, etc. Although, the name suggests or refers to no documents needed, all of the programs have some sort of docs requirements. 

For these programs you do not need to provide documents like tax returns, pay-checks ,w2s  and other docs that are required by the regular loan programs like FHA, VA and conventional loans. Usually , a no doc loan program checks your income by other means. These loans are divided into few types based how a borrower is qualified. Below are some of the popular no-doc programs:

Bank Statement Program:  A borrower is qualified based on his/her bank statements. Usually, a borrower  might need 1 month, 3 months, 1 year or 2 years bank statements. In most of the cases a borrower gets better options and rates with the longer period of bank statements.

Usually , the bank statement program calculates your average of bank deposits. For example, if you have a barber shop and you have around 20K a month average bank deposit , the bank will apply a 50% expense factor to determine your income. In that case your income is 10K. With this 10K monthly income as a  self-employed borrower you might be able to buy a single family primary residence  for 800K with 20% down payment provided you meet other criteria of the loan program. Depending on your credit and rates and the type of the property you might be able to buy a property for more  than 800K.

For a bank statement program you need a minimum down-payment of 20% to 30% depending on your credit score and property type and the purchase price.  For the lowest down payment lenders might ask for a minimum credit score of 760.  It should be mentioned that a borrower with a credit score of 620 might be eligible for this program.  As lenders keep changing their policies , it is better to consult with your loan officer, especially, if your credit is lower than 680.

DSCR : The Debt Service Coverage Ratio is a popular program for the investor. Under this program if the net rental income of the subject property covers the principal and interest , you might qualify depending on the programs. Usually , most of the lenders would require you to have a primary residence to qualify for this program. For example, if you have a primary residence already, you can take the advantage of buying an investment property.  A 25-30% down-payment required. But it might vary  from lenders to lenders.

As an example, if you want to buy a two family house and the combined monthly payment for the principal and interest for that property comes to 3000 and your monthly rental income is around 5000, you might be able to qualify as a borrower as long as you meet the ratio. The formula for the DSCR ratio is net operating income divided by total debt service.  

As per the above figures the yearly total debt service is 3000 x12 =36,000. The yearly gross income from the property is 5000x12=60,000. The total  yearly expenses for this property is 15,000 ( 8000 for  vacancy factor)  + 7000 (for taxes & insurance & other expenses). So, the net  operating income is 60,000-15,000=45,000 when the yearly debt service ratio is 36,000 (3000 *12). Dividing net operating income 45,000 by 36,000 results in a DSCR of 1.25%. Most of the lenders need a DSCR 1.2. Few lenders are very strict and they requires a DCSR of 1.35. On the other hand, there are few lenders they might accept a DSCR of 1 only on case by case basis.  If the DCSR is 1 , it means there is no profit or loss.

Stated Income:  This program requires more down-payment. Many lenders require a down-payment of 35%. But it might be lower if your credit score is excellent or more than 760+. This program does not require any bank statements or rental income. But it needs a CPA letter regarding your business income. As per the stated income by the CPA , the bank determines how much loan you would get qualified for.