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Reduced Documentation Mortgage Loans

There are many programs available that are for people who may not qualify for the standard full documentation required by many different lenders. Some of reduced documentation loans compensate for the lack of supportive documentation that may need to be required.

Some of the examples are as follows:

Stated Income, Verified Assets or SIVA
Stated Income, Stated Assets or SISA
No Ratio
No Income, No Assets or NINA
True No Doc

A Stated Income Loan requires less paperwork than normal for approval. The income is stated on the application. Tax returns, w-2 forms, and pay stubs are not required. The stated income should be reasonable for your occupation

Stated-Income Stated-Assets mortgage is a type of mortgage program in which the borrower does not need to furnish proof of his income and assets. In other words, no paystubs, W2's, tax returns, bank statements, are needed to document the borrower's financial ability to repay the loan. The applicant's income is merely disclosed, or stated, on the Uniform Residential Loan Application.

When your scores are high enough the lender may even offer a reduced documentation program at no additional cost to you. They look at the higher scores as you being responsible enough to know what you can afford and what you can not. Also the higher scores equates to less risk for the lender.

Reduced documentation loans are not an opportunity to falsify income in order to obtain larger loans. This type of mortgage fraud is being more closely investigated by lenders and the FBI.

Reduced Documentation loans are for borrowers that have unverifiable income or assets. Reduced documentation are also for borrowers that do not want the hassle of locating documents or who want to keep their information private. They are willing to pay a premium for this usually paid for with higher interest rates or points.

A Stated-Income loan for a self-employed borrower means you do not have to provide income documentation but you do have to provide proof of employment. Past two years business license will usually suffice.

Self Employed borrowers typically use reduced documentation loans due to tax deductions reducing the actual income/profit of their businesses.

Cash tip earners also use reduced documentation loans since their cash income is not documented.

If your credit scores are high enough many lenders will offer your reduced income documentation. This reduces the amount of documents needed to prove your employment history, income, or assets. Ask your Preferred Mortgage Professional if your credit qualifies for a "rapid" processing feature.

Many lenders even offer reduced documentation loans for borrowers who have salaried, W-2 type employment. Why would a lender do this? In addition to the salary, the borrower may have other income which cannot be documented. Examples of such income include a side business, room rental, income from loans to family or others and many other situations.

Some reduced doc programs only need 6 months worth of bank statements.

Another example of reduced documentation, or alternative documentation, is using 6, 12 or 24 months bank statements to verify income. With a bank statement program most lenders will add up the total amount of the deposits for said number of months and then divide that total by the total number of months being used and they will use this amount for your average monthly income. Some lenders will only use a percentage of the avg. monthly income calculated but most lenders will use the full amount.

The Reduced Documentation loan is geared toward the self-employed borrower and those whose work situations don’t fit the standard mold. It reduces the amount of paperwork you need to gather, eliminating many of the steps required when applying for a loan.

Choosing a reduced documentation loan should not be used in order to afford more of a house than you would be able to on a full documentation loan. These loans are designed to accommodate those customers with hard to prove income.

When using bank statements to qualify for a limited documentation loan you typically can use your personal bank statements up to 100% of the deposits over the specified period of time (6, 12 or 24 months) and when using business accounts it is typically 75% to 80% of the deposits.

Often the lenders offset their risk with making these loans by increasing the interest rate or reducing the LTV.

Many times if your credit score is 720 or higher, you can obtain a reduced documentation loan for the same rate as if you fully documented your income & assets.


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