Question:

How is a full documentation loan different from the other documentation types?

Answer:

A full documentation loan will require stating and verifying all income and assets and that the borrower has been with the same employer for at least two years. The last requirement is what becomes a trouble for many people. Therefore, they turn to the less demanding mortgage documentation types, such as stated income and no ratio.

Under the stated income type income is stated but not verified and is used by people that cannot satisfy the 2 consecutive years of employment requirement. Assets are verified. This option is usually used by couples one of which happens to have poor credit.

The no ratio option allows to exclude income - income is neither disclosed, nor verified. Only assets and employment will be disclosed and verified. What counts here is the ratio between mortgage, other debt and any other expenses to income. Most no-ratio clients are used to maintaining larger ratio than usual, and are relying on non-wage income such as investments. Such borrowers hate convincing clerks about their funds' reliability.

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