How Do I Get Myself Into the Full Doc Loan Category?
Borrowers interested in taking out a first mortgage or refinancing might be surprised by the variety of loans provided by lenders. However, not every loan option provides the same benefits to borrowers. Because of the differences between the loans, borrowers should research each type of loan before applying for a mortgage.
The most common and cost effective loan is the full documentation or full 'doc' loan. A full doc loan is granted to borrowers who can provide documentation of all of their income and assets. To be approved for a full doc loan, borrowers must provide paycheck stubs and tax information to the lender. Any self-employed borrower that wishes to be approved for a full doc loan will need to bring copies of their federal tax returns to verify their income.
Individuals who are self employed, working as an independently contracted agent, or an investor might have a difficult time being approved for a full doc loan because their means of income is untraditional. Although approval might be difficult, those individuals who wish to apply for a full doc loan instead of a low doc loan can apply if they are able to provide the necessary documentation.
- Comprehensive list of savings bonds, stocks, and/or investments and the market value of each
- Comprehensive list of bank accounts and banking information (i.e. branch address) along with bank statements covering the last 3 months.
- Vehicle titles (copies) to any motor vehicle that is paid in full.
- Car loan, student loan, or any other personal loan documentation along with the creditor's address and phone number.
- Credit card invoices for the last several billing periods
- Mortgage and/or rental payment proof
- Proof of child support or alimony payments (copies of checks)
- Copy of approved purchase contract
- If the seller required a deposit to secure the buyer's seriousness, a copy of the cancelled deposit check should be filed.
What if my credit history is not established well enough?
Borrowers with no credit history established should supply
the lender with copies of any checks (rent, utilities, etc) that provide them with a payment history. This also allows the lender to see that the borrower can handle a revolving debt.
Likewise, if you have no credit history lenders might ask you about the source of your down payment. If you received the down payment as a gift, be sure to document this by getting a gift letter and gift check. Make sure the gift letter states that the money was not a loan and that you will not be required to pay any of the down payment money back.
Each lender will have slightly different requirements on the information borrowers must provide. Having the listed items on hand will definitely help speed up the application process, but be aware that this list might not be comprehensive. Ask your lender what to bring to the loan interview to be certain you have everything they will require.
What if I cannot provide the necessary documentation for a Full doc loan?
If a borrower cannot provide the necessary documentation for a full doc loan, they should consider the alternative low documentation loan. The low 'doc' loan now accounts for almost 5 percent of home loans in Australia. These loans have become increasingly popular and lenders outside of the banking industry are now offering the low doc loan as an alternative for borrowers.
Low doc loans are also popular for borrowers who do not want to hassle with the paperwork and documentation required for a traditional, full doc loan.
Is there a downside to low doc loans?
Low doc loans often come with higher interest rates because of the application requirements and risks associated with this type of loan. Lenders alleviate the increased risk associated with not verifying the borrower's income through an increased interest rate. Low doc loan interest rates can be up to three times higher than a traditional loan. Low doc loans also come packaged with higher fees and charges.
To be certain you qualify for a full documentation loan, be sure you can access the required financial documents. In doing so, you are ensuring a lower interest rate and smaller fees and charges.