Finance
What is a 'no-doc' or 'stated income' loan and why are they less common today in Idaho?
ALoans that require no documentation; they are fully allowed today
BLoans that require minimal income documentation; they became associated with predatory lending and are now restricted under Dodd-Frank's ability-to-repay rules✓ Correct
CGovernment-backed loans that simplify paperwork
DLoans for self-employed borrowers that are still widely available
Explanation
Stated income/no-doc loans required little or no income verification and became associated with predatory and fraudulent lending before 2008. Dodd-Frank's ability-to-repay rules now require lenders to verify income, making these rare for residential loans.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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