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Loan Documentation Requirements

Full Doc, Easy Doc and No Doc Loans

Full Doc Loans

With this kind of loan all income and assets are documented.

Income is documented using paystubs and W-2s for salaried borrowers. Self-employed borrowers use federal tax returns to verify income. The Loan Application Checklist covers most supporting documents you and any co-borrower will need to supply. Once you apply, a lender provides you with a detailed list of documentation required to approve your loan.

Easy Doc and No Doc Loans

With Easy / No Doc loans little or no documentation is provided to substantiate the borrower's income and assets.

These loans are mostly for self-employed borrowers who have difficulty verifying all of their income, and for service industry employees, such as bartenders, waiters, and hair stylists that have pay which is difficult to determine precisely. These loans may be also used by borrowers who get most of their income from commissions, or by borrowers with very complex income structures. For example, a borrower who has income primarily from rental properties and investments may be hesitant to verify all sources of income due to the volumes of paperwork this would require. Additionally, borrowers who receive a good portion of their income in cash, such as tips, might also want to consider the Easy Doc loan.

Because of the risk associated with Easy / No Doc loans, a borrower may have to make a larger down payment. In many cases, the LTV on a Easy / No Doc loan is limited to 70 -75%. Some lenders, however, will allow a 90% LTV.

Credit standards are generally a little higher for Easy / No Doc loans. Borrowers must have maintained a good repayment history within the last two years.  Additionally, some lenders will require borrowers to maintain higher bank balances than typical applicants usually must have.

Lenders will assess higher interest rates and fees on loans when little or no documentation is provided to substantiate the borrower's income. Expect the interest rate to be about one-half to one percent more than the rates on a fully documented loan. Consequently, Easy and No Doc loans should only be used when necessary, not simply to avoid the paperwork requirements of a Full Documentation loan.

Easy and No Doc loans could be classified into "Stated Income", "Stated Assets", "No Income Verification (NIV)", "No Income / No Asset (NINA)", "No Ratio", etc. With "Stated Income" loan, the borrower can simply state his income on the application, and do not have to provide any documentation to substantiate this stated income. Lenders usually verify that the borrower has assets that logically match the stated income. With "No Income / No Asset" loan no income and no assets are verified.


Related Articles:

Loan Application Checklist This is a list of documents most lenders will require in order to process your mortgage application.

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