| Documentation Types
The real estate loan industry has developed a number of different ways borrowers can apply for a loan. These various documentation types allow a great deal of flexibility for borrowers in traditional or non-traditional circumstances.
Fully Documented Loan Application
This type of documentation means just what its name implies. For everything stated on an application, documentation is provided by the borrower or obtained by the lender. For example, employment is verified through use of a verbal or written VOE—Verification of Employment. Assets are documented with two months or one quarter of statements from all accounts, or by a VOD—Verification of Deposit. Income is verified through W-2’s and pay stubs, and housing history is verified through a mortgage or landlord rating. Generally this type of loan documentation will allow the borrower the best interest rates.
When a borrower has income that might be difficult to document, a borrower may state an income amount on the application. This may be needed in cases where the borrower works a number of jobs, perhaps has a regular job and a side business, or income from various sources. Underwriting will require proof of a two year job history or self-employed status, but will not require income numbers.
This program allows borrowers to state their assets on an application but requires no supporting documentation.
Variations on the two types of documentation above.
This program requires documentation or verification of employment, but does not request any income amount, documented or stated.
This is a “No Asset, No Income” loan. No employment, income or asset information is entered on the loan application.
Remember that the programs and interest rates to borrowers are risk-based. A well-qualified borrower, who can document all application items, is statistically a lower risk for repaying the loan. Those borrowers will enjoy the greatest selection of loan programs at the lowest rates. When risk increases, as perceived by a lender, fewer programs are available and at higher interest rates.
Higher risks can be offset by other factors. For example, a borrow who does a “NO DOC” loan, but makes a down payment of 35% or greater of the purchase price, may enjoy the same low rates that a “FULL DOC” borrower may obtain with 20% down.
This is another area in which a good loan officer can help you get the best program and rate in line with the documentation type of loan you require. |
