Documentation requirements for Mortgages

Full Documentation: Both income and assets are disclosed and verified, and the income is used in determining the applicants ability to repay the mortgage. Stated Income - Verified Assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified and must meet an adequacy standard such as, for example, six months of stated income and two months of expected monthly housing expense. Stated Income - Stated Assets: Both income and assets are disclosed but not verified. The source of the income, however, is verified. No Income - No Assets: Neither income nor assets are disclosed. No Ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's housing expense must be some specified percent of income is ignored. Assets are disclosed and verified. No Income: Income is not disclosed, but assets are disclosed and verified and must meet an adequacy standard.Stated Assets or No Asset Verfication: Assets are disclosed buy not verified, income is disclosed, verified, and used to qualify the applicant. No Asset: Assets are not disclosed, but income is disclosed, verified, and used to qualify the borrower. No Income - No Assets: Neither income nor assets are disclosed.

Generally, the more documentation you can provide to the lender, the smaller the risk is to the lender, which in turn gives you a better rate.

A qualified mortgage professional will look at your whole financial situation and can make recommendations on that type of income will suit you best.

The method of documentation that a lender's underwriter will perceive to have the lowest risk factor is W-2 income backed up by two years of actual W-2 statements and one complete month of paycheck stubs. The underwriter will want to be comfortable that they are issued by a legitimate company or organization. Pay stubs or W-2 statements that are handwritten rather than computer or machine generated will cause a red flag.

If you qualify, generally the fast closings occur with stated income or no documentation required loan programs. As a rule of thumb, the more documentation provided, the longer it may possibly take t close the loan, however we are often able to lend you more money at a better rate if more documentation is provided.

Alternative Documentation can be the use of pay stubs, W-2 forms, and bank statements instead of Verifications of Employment (VOE) and/or Verifications of Deposit (VOD) to qualify a borrower for a mortgage.

There are many types of "alternative" options. Some lenders allow bank statements in place of paystubs, some allow tradelines that do not appear on credit. There are many creative ways that your mortgage broker should know about to best help your situation.

If the broker working on the loan determines you can fit into a full doc loan vs. a stated loan the move is permitted to get a better interest rate. However if you have to go from full doc to stated once in underwriting that is not usually permitted.

A handful of banks offer the simplicity and convenience of Stated Income mortgages to borrowers with the same low interest rates as full documentation loans. Applicants must have good credit profiles, often with credit scores of above 720. There is usually also limitations on the subject property, such as no 3-family or 4-family houses.

When stating assets on your loan application you are usually required to document proof of them. If the money is in a checking or savings account then usually the underwriter will request 2 months of bank statements to show the money is in there and has been there. A 401k statement is required (the most recent statement you have) to document a 401k account. If you do not want to deal with documenting assets during your loan process simply do not list them on your application. Sometimes providing assets may provide a better approval for a lower rate than if you don't document assets though.

If your credit scores are lower than 680 you can expect a higher interest rate on stated income and no documentation loans.

With automated underwriting if there are either enough assets, an excellent credit history, or sufficient equity or a combination of them the lender may reduce the documentation to things such as just one paystub, no asset verification or even a drive by appraisal which can speed the process up.

These documentation types should not be used for fraudulent purposes. The lender as well as the loan officer and client could be held liable for fraudulent loan practices.

The document requirement options available to you might change if you are buying a rental property. For example, a No-Doc loan may still be an option, but at a lower LTV.

Depending on your situation No Doc income may even prevent you from obtaining a loan.

Other types of documentation may be required for alternative income sources such as annuities, pensions or if you receive alimony. Your mortgage broker will assist you in determining what documents you will need.

Your mortgage lender will inform you of all the documentation you will need to proceed further in the loan process.

Often the documentation requirements for mortgages are abbreviated. The most common are: full documentation (full doc), stated income - verified assets (SIVA), stated income - stated assets (SISA), no income - no assets (NINA).

» DISCLAIMER: The information contained in this article on 'Documentation requirements for Mortgages' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.