Question:

Can I avoid full documentation mortgage loan?

Answer:

Yes, you probably can avoid a full documentation mortgage loan and take a reduced doc mortgage instead. However, if you want to avoid taking a full documentation mortgage loan in order to conceal under the table income, you may better refrain from doing it.

In fact not taking a full documentation mortgage loan is very convenient for self-employed professionals and small businesses. While in the past almost every borrower requested a full documentation mortgage loan (rates on the alternative documentation loans were often too high), nowadays around 15% of borrowers will ask for reduced documentation loans.

Why would people want to avoid a full documentation mortgage loan?

Sometimes a couple may like to get a mortgage loan but under full documentation loan requirements, they will not be eligible for the desired loan amount if one of them has lower credit score, or if they declared their debt-to-income ratio, it wouldn't qualify them for the loan.

Even though lenders and brokers may be aware that their clients want to avoid full documentation mortgage to possibly hide additional income, their business is to make sure borrowers have enough income and assets to repay a mortgage, as it's not the lender's business to do IRS's job.

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