Negative Amortization Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the buyer ends up owing more than the original amount of the loan. Net Effective Income The borrower's gross income minus federal income tax. Net Pay The amount of salary left or clear after taxes and other deductions are taken. Different than gross pay, which is the amount of salary earned before income is taxed and other deductions are taken. Lenders look at your gross and net pay to help decide how much money to lend you. No-Doc Mortgage A no-documentation or "no-doc" mortgage is a product that certain lenders offer to borrowers which generally requires a down payment of at least 5% to 30% or more of the home purchase price or who generally have at least 25% equity in their home. Loan programs featuring lower down payments (5-24%) are also available to borrowers with excellent credit. No-doc mortgages are generally a wise choice for self-employed people, those who do not wish to verify their income, and those with a brief or blemished credit history, or no credit. The benefits of a no-doc mortgage include a shorter application process since you are not required to provide income, employment or asset documentation, as well as a streamlined approval process through the lender because there is little subsequent verification. However, no doc mortgages generally will be at slightly higher interest rates and are offered by fewer lenders. Non-Assumption Clause A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Non-Conforming Loan A conventional home mortgage that does not meet the criteria of Fannie Mae or Freddie Mac for various reasons including loan amount, loan characteristics or underwriting guidelines. Non-Conforming loans usually incur a higher rate and/or points. Normal wear and tear The reasonable condition of an auto assuming its age, mileage and proper maintenance. Top of Page