Documentation Types

Financing, Hard Money Lenders, Private Money
1

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, usually the rule of the thumb is you need 2 times your monthly mortgage payment in reserves + any funds to close. Sub-prime lenders usually don’t have the asset verification part but as credit007 says “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, 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, so double check when you are talking to someone what their definition of “no doc” is. It is a very common documentation type with Alt-A lenders.

I’ve met several loan officers who have been in the industry for over 3 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?.

2

Here’s some additional info that should match up with his and applies to investors. Couple things to keep in mind.

  1. Lenders have the ability to go back through your past files to see what income had been used. So if 6 months ago you did a full doc or stated loan of $5,000 and currently have an application with much higher, the lender could ask for futher explenation. My recommendation is for those on a tight debt to income ratio to always use a no ratio loan as described below.
  2. The amount of reserves listed below must have been in your account for at least 2 months. If you are doing a cash out refinance many lenders will NOT allow you to use the cash out proceeds received to satisfy the reserve requiement.

Full Documentation
If self employed or over 25% of income is made by commission a full analysis of the last 2 year’s personal and business tax returns will be done. Self employed borowers must have a business that has been in place for the last 2 years. As a wage earner or salaried employee the last month of pay stubs with the last 2 year’s w2s will be looked at. There must be 2 years of continous employments in the same line of work. Those who currently own properties will need the following. For all properties owned less than 1 year, 75% of the lease income will be used. Otherwise, income claimed on taxes will be factored. Debt to income ratios per program guidelines will need to be met. Reserve requirements will need to be met as well. Reserve means how much you in have in liquid assets like checking, savings, money market…etc… retirement accounts like 401k, stock, mutual funds can be used but only 70% of the value. 1 month of reserve = 1 month of what the expected payment with taxes and insurance will be. Typically for investors 6 months of reserves is required. If you’re submitting multiple deals then mutliply the resereve requirement.
*Some high ltv 100% lenders will require 12 months of reserves.

Full Income / Stated Assets (FISA)
Same full doc requirements for income but assets are not verified

Stated Income / Verified Assets (SIVA)
Most clients who are self employed or are investors know that many tax deductions are available to them. Unfortunately these deductions lower the bottom line income and can some times create financing hurdles. Lenders will allow a client to state what their gross income has been if they meet the 2 year history requirments mentioned above. Clients will not be coached as to the amount needed to qualify. Underwriters will look closely at the position or business in relationship to the amount of income and available assets. Debt to income ratios per program guidelines will need to be met. Reserve requirements in full doc will need to be met as well.

Stated Income / Stated Assets (SISA)
Same as above but assets can be stated when funds have been held as cash or not held in a liquid account long enough to meet the reserve requirements. Debt to income ratios per program guidelines will need to be met. Reserve requirements in full doc will need to be met as well.

No Ratio
Same 2 year history requirement. However, no income figure will be listed on the application. Therefore a debt to income ratio is not factored. Underwriters will look closely at the position or business in relationship to the amount of income need to normally meet the ratios. Reserve requirements in full doc will need to be met as well.

No Income / Verified Assets (NIVA)
Same as above but underwriters will not verify employment or income. Reserve requirements in full doc will need to be met as well.

No Income / No Assets (NINA)
With or Without Employment

(True No Doc)

The application will not disclose income or assets. Therefore, no debt to income ratio is calculated or reserve requirement needed. Funds for down payment and closing costs will not need to be verified.
In cases where a 2 year history of employment can not be established then no employer will be disclosed. A slightly better rate can be given for employment verification.