What is a Full Documentation Loan?
Both income and assets are disclosed and verified, and income is used in determining the applicant’s ability to repay the mortgage. Formal verification requires the borrower’s employer to verify employment and sometimes it is necessary for the borrower’s bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower’s original bank statements, W-2s and paycheck stubs.
Full documentation loans are loan applications that require a high level of information about employment, assets, and sources of income of the applicant. The full doc loan is one of the more common types of loan applications in use within the United States. Many mortgage lenders make use of a loan format that can be properly referred to as a full documentation loan. Verifying income normally involves providing a number of official documents that will verify the level of income reported by the applicant. Generally, this will include the W-2 form for the most recent tax year, along with a current pay stub. In the event the applicant is self-employed, 1099 forms for the previous calendar year may be utilized. In both scenarios, the process for a full documentation loan normally involves providing copies of the state and federal tax returns for the two most recent years. Self-employed applicants may be required to include a profit and loss statement, as well as one additional set of annual
The borrower discloses both his income and assets, with supporting documentation. This includes the borrower’s two most recent Federal Tax Returns, three most recent monthly bank and brokerage statements, two most recent W-2s, two most recent paycheck stubs, a property appraisal, title insurance, credit report, and other supporting documents that the bank uses to determine the borrower’s eligibility for the mortgage. Banks will contact the borrower’s employer to verify employment and the borrower’s bank to verify deposits.
Full documentation means just that; income, assets, and employment are disclosed and fully verified. The verifications are used to determine the ability of the applicant to repay the loan. The most common verifications required are; VOE (Verification of Employment) and VOD (Verification of Deposit). Most often mortgage companies will use the VOE, 2 or 3 months of Bank Statements, W-2s for last 2 years, and 1 month of current pay stubs.
Both income and assets are disclosed and verified, and income is used in determining the applicant’s ability to repay the mortgage. Formal verification requires the borrower’s employer to verify employment and the borrower’s bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower’s original bank statements, W-2s and paycheck stubs.
