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Planning to refinance your current mortgage? There are actually several options that are available for you. There are also a number of reasons to why homeowners would want to refinance their home mortgage, and that includes: obtaining a fixed interest rate, eliminating private mortgage insurance, receiving cash out at closing, and so many others.

Refinancing a home loan involves getting a new mortgage and thus, you are required to present the mortgage company with various documentations. However, if you prefer privacy, there are also ways to obtain a loan with minimal documents.

If you have good credit, you may be able to get a no doc refinance loan. As each lender is different, some lenders are willing to grant a refinance with no documentations, whereas other lenders are not as eager to take a chance. The process of attaining a no doc loan is pretty simple. With these loan applications, the homeowner must provide their social security number and loan amount. The lender will then base loan approval solely on credit scores. In order to obtain a no doc loan, you must have a very high credit score.

So as not to be confused, low document home mortgage loans are different from the no document loans in several ways. First, you need to state your income and employment history in low document loans. You are also asked to submit recent paycheck stubs or income tax returns for the past two years. Second, low document loans are beneficial to contract and self-employed employees and to those who receive cash payments.

On the other hand, individuals who prefer to keep their privacy, and of course, who have good credit scores, can opt for a no document refinance loan. These individuals would not want to give out detailed information regarding their finances, income, and employment.

Now, why are people with very high credit scores make ideal candidates for a no doc loan? While lenders may not be really happy approving loans with less or no documentations, they find people with good credit reports unlikely to tarnish their perfect records.

Since low doc and no doc home mortgage loans undergo a faster process, the applicant has to be prepared to pay a higher interest rate on his loan. Of course, a higher rate would be fine as long as it offers the individual some privacy and speed.

But if the applicant would want to refinance his home mortgage loans just to get a lower interest rate then probably, this no doc loan would not be a good option. The individual should always get a quote from a lender and have the refinance rate of the no doc loan compared with his current interest rate.

The subprime meltdown and the subsequent credit crunch have completely transformed the US mortgage industry.

The previous dozen years of mortgage options and financial bliss have become a memory, with every liberal mortgage program no longer available. The remaining mortgage products are quite unlike the guidelines from the past few years. Now…they require full documentation of income, strong credit, and actually proving you have a job! It’s no stretch to say that common-sense has returned to the mortgage world.

Post Mortgage Meltdown:

Before the financial crisis that destroyed the mortgage market, 100% financing loan programs were availalable to all. The only real requirement that existing in those days, were that you prove you were a US citizen. (non-citizens could only get 90% financing!). With credit scores in the high 500’s, you could still obtain 100% loan financing. In November 2008, only USDA and VA loans offer 100% financing. FHA loans have removed their option to allow the seller to gift 3% to the buyer, so they are now capped at 97%. Fannie Mae and Freddie Mac offer 97% options, but no 100% programs at all. If anyone tells you differently, they are giving you bad information.

The Alternative A credit market, also known as Alt-A loans, which used to offer very appealing niche loan financing products catering to borrowers with credit scores from 660 and up are also gone. These lenders offered loan programs to borrowers with scores down to 620. Aggressive programs, such as 100% no doc financing, were typically not available to borrowers below a 660 middle score. Today, even these seemingly viable products made to very strong borrowers have dried up. They were a victim of the global mortgage chaos that devoured the sub-prime banks and saw even the big 3 Automobile companies suffering and on the verge of collapse. Alt-A lenders had very liberal DTI ratios, reduced and even no income documentations, and the ability to turn any loan into an interest-only mortgage!

Leading Alt-A lenders included GreenPoint, SunTrust, Lehman/Aurora, and First Horizon. Beyond these market leaders, there were hundreds and hundreds of small niche banks and mortgage companies that arose to fulfill the demand for certain niches. Almost all of these lenders are now out of business, and the ones remaining have removed all Alt-A products from their product line. The big loser with these products drying up are the small business owner with great assets and credit, but income “reduced” through their desire to reduce taxes.

Where are we now? Or…after the 2008 collapse of the US mortgage market:

As 2008 ends, hundred and hundreds of banks are closed operations. The aggressive loan options that arose over the past decade are now gone, and more than likely will never return. The credit crunch is making it even tougher for average customers seeking home loans to get a loan. FHA is king again, as the only program that lenders are comfortably loaning money towards is the hallmark of the mortgage business — the FHA loan from the Department of Housing and Urban Development. Credit score requirements are now in the low 700’s, where before a 680 was sufficient. Cash-out refinance mortgages on single family homes are very hard to get, and for many people, impossible. HELOC’s are being reduced for millions of customers. Additionally, investor loan financing is extremely hard to obtain, no matter how strong the client.

As 2008 comes to an end, mortgages are still very difficult to obtain. Fannie Mae and Freddie Mac have imposed stricter guidelines effective December 1st, 2008, that will further restrict the ability to obtain residential mortgages for most of us. There are tighter restrictions on the number of properties owned, more stringent credit requirements, and additional restrictions for borrowers who have had a past BK or foreclosure.