No Document Loans

"No document" or "low document" loans are financing products where the lender does not require the borrower to provide standard proof of income, such as tax returns or pay stubs. While these loans can be legitimate tools for self-employed individuals with complex finances, they are highly susceptible to fraud. In a fraud scenario, a borrower or a loan officer intentionally inflates the borrower's income on the application to qualify for a larger loan than they can actually afford. Because the lender does not verify the income documentation, the lie goes undetected until the borrower defaults.