Debbie Siegel's Mortgage Minute
What Does Mortgage Documentation Consist Of?
There are three levels of income documentation that you could be asked for
when applying for a mortgage. Because the risk to the lender increases as
the amount of documentation decreases, the rates associated with each
level will be different.
- The most common mortgage is a full documentation loan. This requires a
W2, current pay stub, and proof of assets. This is to verify that the
income amount on the application is correct. (If you are an outside
contractor or self-employed and, therefore, don't have a W2, you may be
required to produce your most recent tax returns - typically, the last two
years.) Full documentation loans often qualify for the lowest available
rates.
- A stated-income loan requires less documentation. These are for people
whose earnings don't always match to the bottom line of their income tax
returns. In this case, you would state your gross earnings on the
application but they wouldn't be verified. Asset information would still
be required. This doesn't mean you can make up a salary number, but it
allows you not to submit the returns. Without income verification, the
risk is higher to the lender, and therefore, the rate is slightly higher
as well.
- The lowest level of documentation is called "no doc." This is a program
where you don't submit any income information and don't even state a
number on the application. You provide the bank with your name, social
security number, address of property and the projected down payment. The
loan is based off of your credit and the property's appraisal report. "No
doc" loans are the riskiest from the bank's standpoint, so the rate is
typically the highest among the three levels.
* Next 37 17 investors only!
Remember, it is important to work with a trusted mortgage professional to
figure out what type of documentation is appropriate for you and your
specific situation.
Got questions about real estate financing? Contact
Debbie@westchester-mortgage.com
or 617-965-1236. She'll consider them for
inclusion in a future column. Debbie Siegel is president of Westchester
Mortgage in Newton, Mass. She is licensed in several Northeastern states.
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