liverichly

Documentation Types

7 posts in this topic

Over the past couple months I've seen several posters ask for certain documentation types later to find out that's not really what they are seeking after all, the most common variation I've seen is people looking for no doc loans when they should be looking for some variation of stated income or no ratio.

To help clarify the different documentation types on a mortgage, from usually what gets the best pricing & terms to the worst:

Full doc - if you are self-employed this most likely means 2 years of federal tax returns (all schedules). If you are a wage-earner it most likely means 2 years of W-2's and a paycheck with YTD earnings information. If income is hard to determine based on the paycheck & W-2 then a verification of employment (VOE) form can accompany it. Also requires assets, the rule of the thumb is you need 2 times your monthly mortgage payment in reserves + any funds to close, some programs could require more. Sub-prime lenders usually don't require asset verification but your mileage may vary with those types of lenders. Employment is verified.

Lite doc - usually when 3, 6, 12, or 24 months of bank statements are used to document income in lieu of paycheck stubs, W-2's, & 1040's. Assets are still required in addition, sub-prime's asset requirement is usually the same as full doc. Employment is verified. This is a common document type for sub-prime financing, while not many non sub-prime lenders & programs find this acceptable.

Stated income (also known as stated income/verified assets - SIVA) - income is stated on the loan application, employment is verified, assets are verified (asset verification becomes more common on stated income sub-prime loans than full doc sub-prime).

Stated income/stated assets (SISA) - income & assets are stated on the application but not verified, employment is verified. Most sub-prime stated income loan programs are of this type.

No ratio - employment & assets are verified, income is either on the application but debt ratios do not apply or income is left completely off the application.

No income/no asset (NINA) - income nor assets are listed on the application, employment is still verified.

No doc - zip, zilch, nunca (thanks David Spade), no assets, no income, no employment. Most sub-prime lenders "no doc" program is really a NINA but they call it "no doc". About 1 out of 3 or 4 of sub-prime lenders offer this documentation type.

Not all lenders document type labels are the exact same as I've outlined above, but in general that is the way it works.

I've met numerous loan officers who have been in the industry for several years who still have a tough time figuring out which document type is most beneficial to the borrower, just be sure that you and your loan officer are both on the same page.

For further reading about documentation options: What Are Mortgtage Documentation Requirements?

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A lot of mortgage people do not know these programs and actually can submit them wrong into underwriting because of that lack of knowledge. This will hurt you in getting this type of mortgage - (length of time to close, rate, credit score, etc).

For example, completing all the information on the initial application and then going No Doc will hurt because the mortgage person will submit this info along with the new No Doc application. Once the information is seen by the underwriter on the initial application, it will be "denied" because they have seen the real numbers and info from the initial application. Then, the mortgage person will have to re-submit to a different lender with NEW initial application docs. This will affect the time it takes to close the loan, your credit score (if they have to use the new investor's credit and re-pull), and rate (rates change every day and if you have to re-lock with another investor, rates may be different).

If you have filled out and signed an initial application stating your employment, income, and assets before you really know which program you will be doing, make sure you tell your mortgage person you want to fill out a new application if they do not suggest it.

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Which Documentation that we should help?

The official Documentation or Mambo Manual?

Actually I have interest in translating the doc into Indonesian Langguage Althought this may not help too much since many Indonesians are good in English O_o.

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Over the past couple months I've seen several posters ask for certain documentation types later to find out that's not really what they are seeking after all, the most common variation I've seen is people looking for no doc loans when they should be looking for some variation of stated income or no ratio.

To help clarify the different documentation types on a mortgage, from usually what gets the best pricing & terms to the worst:

Full doc - if you are self-employed this most likely means 2 years of federal tax returns (all schedules). If you are a wage-earner it most likely means 2 years of W-2's and a paycheck with YTD earnings information. Also requires assets, the rule of the thumb is you need 2 times your monthly mortgage payment in reserves + any funds to close, some programs could require more. Sub-prime lenders usually don't require asset verification but your mileage may vary with those types of lenders. Employment is verified.

Lite doc - usually when 3, 6, 12, or 24 months of bank statements are used to document income in lieu of paycheck stubs, W-2's, & 1040's. Assets are still required in addition, sub-prime's asset requirement is usually the same as full doc. Employment is verified. This is a common document type for sub-prime financing, while not many non sub-prime lenders & programs find this acceptable.

Stated income (also known as stated income/verified assets - SIVA) - income is stated on the loan application, employment is verified, assets are verified (asset verification becomes more common on stated income sub-prime loans than full doc sub-prime).

Stated income/stated assets (SISA) - income & assets are stated on the application but not verified, employment is verified. Most sub-prime stated income loan programs are of this type.

No ratio - employment & assets are verified, income is either on the application but debt ratios do not apply or income is left completely off the application.

No income/no asset (NINA) - income nor assets are listed on the application, employment is still verified.

No doc - zip, zilch, nunca (thanks David Spade), no assets, no income, no employment. Most sub-prime lenders "no doc" program is really a NINA but they call it "no doc". About 1 out of 3 or 4 of sub-prime lenders offer this documentation type.

Not all lenders document type labels are the exact same as I've outlined above, but in general that is the way it works.

I've met numerous loan officers who have been in the industry for several years who still have a tough time figuring out which document type is most beneficial to the borrower, just be sure that you and your loan officer are both on the same page.

Thanks for this post! It makes me think that perhaps we are not looking for the right loan and that no one has been able to guide us in the right direction as of yet... perhaps it would mean too much work for too few dollars, I dont know. I am not sure as to which sort of loan we should be looking for ...if any:cry: ...so we would be very grateful for any help in this direction!

Anyway we have joint tax returns but since we write off all that is legal and true we do not show enough income even with the add-backs. However if our bank account statements were taken into consideration, it would easily be very clear how much we could afford. We cannot change our way of paying taxes, because if we did, we would not be able to afford a house! (One lender told us stop all right-offs for two years! We would not have been able to afford that at all.)I have 0 credit since I lived abroad since I turned 21 until 2006 and I work as a wife without salary in our Mom/Pop company that my husband has owned and operated since 1986...which is still going strong despite the recession. My hubby's credit scores are in the 730s. We owe on a truck and a timeshare and we rent since we could not buy after selling our home that was too far away from work. We were not upside down either. Thanks for any suggestions as to what kind of loan to ask for or any other means of purchasing a home.

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Elle, you have posted all over the board looking for a loan type that no longer exists. The post you quoted was written in 2004 - when money was plentiful and there were a wide variety of different loan types for all kinds of income. Since that time the banks have pulled back substantially on the types of funding they will do as the secondary market has totally dried up for high risk mortgage loans.

The loan types that are available to the self employeed and unemployeed are private loans. (You said you are working for the family business but you write off everything). The way to overcome this type of issue is: 1) a larger downpayment AND 2) have the seller or a private lender loan the funds.

Finding either a seller that owns their home free and clear so they can hold a mortgage for you is possible, but rare in these days. You and the seller set the terms then because the loan is a purchase money loan not subjet to third party underwriting. There are also private lenders that loan to people with your situation, but the LTV is typically limited to a maximum of 65%. This is also called a collateral loan. Again, this is private financing and not available everywhere - but there are a lot of private lenders out there today looking to fund. The reason they are looking to fund is because the rate is much higher than a normal rate and there is typically a balloon afer 3 to 5 yrs (at most).

When you write off all of your income you don't qualify for a full doc loan or any time of high LTV. The idea behind that is if you are spending money on your business and you have no additional cash funds you become a high risk borrower. That's why you need to look at private sources - either seller or third party private sources.

Edited by Denita
more info

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