Depending on your credit, the type of documentation you are willing to provide and the “loan-to-value ratio” of the property, there are bound to be programs to accommodate your needs through a broad spectrum of different types of lenders.
In the end: the lower your score, the fewer documents and the higher your “loan-to-value,” the higher your interest rate is going to be.
To assist you in your search for future financing, here is a list of how lenders are classified and the type of programs available, with regards to documentation requirements:
Types of Lenders
• Conforming – These are mortgage lenders that conform to the strict guidelines of Fannie Mae and Freddie Mac. They have the strictest requirements – but offer the lowest rates.
• Prime – These lenders model the strict guidelines of conforming lenders, but offer higher loan amounts. Minimum credit scores are usually 620 and above with no more than one late payment allowed on an existing mortgage.
• Alt-A – These alternative lenders cater to borrowers with excellent credit, but who do not fit exactly into either the prime or conforming lenders guidelines. This may be because they need a higher loan-to-value ratio, lack traditional employment or have nontraditional assets.
• Nonprime – Also known as “subprime lenders,” these allow credit scores to go as low as 500 and will permit several mortgage late payments. However, the lower the credit score (usually dropping below 580), the more the “loan-to-value ratios” requirements decrease – and programs consequently come with significantly higher interest rates.
• Hard Money – These types of lenders usually don’t bother to verify income or assets – and they also usually require “loan-to-value ratios” of 75% or less. Needless to say, this is the bottom of the barrel for hard-to-fund borrowers. Interest rates from these lenders have commonly been seen up in the double digits.
If you decide to search around online for mortgage lenders and quotes, chances are you are going to run into some commonly-used terms and acronyms that may need further explanation.
Here is a list of the most popular ones you will encounter that describe exactly what to expect regarding the type of documentation you may need to provide:
Types of Documentation
• Full Documentation (Full Doc) – This is the classic mortgage requiring two years of W-2’s, 30 days worth of pay stubs and two years of tax returns. If you are self-employed, you will need the last two years of your personal tax returns and two years of your business tax returns. For both cases, you will also need to verify your assets such as bank accounts, mutual funds, stocks, retirement accounts, etc.
• Stated Income Verified Assets (SIVA) – If you are unable to prove your income for the past two years, but can verify your assets, you can use this program to state your mortgage application without providing further proof of it.
• Stated Income Stated Assets (SISA) – The same as a “SIVA” – except that you are unable to also verify your assets, so they are simply stated as well.
• No Documentation (No Doc) – This type of mortgage does not require any income or assets be disclosed even on the mortgage application – zip, zilch, nothing, nada, none.
• Limited Documentation (Lite Doc) – Instead of providing W-2’s and pay stubs as in the case with full documentation, this program allows six to twelve months’ worth of bank statements, where all of the recorded deposits are averaged to determine your gross monthly income.