What is a Full Documentation Loan?
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 tax returns. Sources of income such as Social Security, interest earned from investments or bank accounts, and veteran's benefits may also be considered.
Along with the verification of income, the applicant for a full documentation loan will also provide proof of any assets currently in his or her possession. This will include details on all bank accounts, stocks and investments, and titles and deeds to property such as land or vehicles. For all financial accounts, the lender may also request copies of the most recent two to three month period.
The current amount of indebtedness will also be documented in a full documentation loan process. Every type of outstanding debt is included. This will mean all credit card balances, furniture, automobile, and student loans. In addition, the applicant will need to declare any child support or alimony payments that he or she is responsible for making on a recurring basis. Essentially, any type of debt should be reported as part of the process of obtaining a full documentation loan.
Finally, the lender usually requires documentation on the desired purchase. In the event of seeking assistance to acquire a home, full doc loans will involve providing proof of the current market value of the property. While the full documentation loan is very detailed, the effort is usually rewarded with a competitive rate of interest that can save the consumer a substantial amount of money over the life of the loan.
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