This article will explain the documentation requirements for a home loan and why lenders have different types of programs. Depending on your situation you may want to provide more or less information.

The more information you provide the lower the cost of the loan and the more options you will have. Upon finishing this article you will understand a Fully Documented Loan, a Limited Documentation Loan and a No Documentation loan.

Fully Documented Loan

Taking a fully documented loan implies that you submit all documents expected from you for loan approval.

Here’s what you have to usually submit:

• Tax returns or pay stubs for the past two years

• Bank statements for the past two years

• VOD and information about other assets

• If you are a W-1, the lender will call your employers for a verification of employments

• CPA letter and/or business license in case you are a self-employed person, which lists out details of more than 2 years of employment in same job or field.

Benefits: You pay lesser interest than what you would have to in a no document loan.

Here’s a tip: You can check out what special benefits you can get with your banker when you take this loan type with them.

Look out for this: The loan process may take longer than in a limited document loan or a no document loan. If you are a self-employed person unable to provide the necessary documents at the time of taking the loan, it would be better to opt for a limited or a no document loan.

Easy Home Loan or Limited Document Loan

If you are looking for a home loan type that is ‘No hassles and a few forms’, the Easy Home Loan or Limited Document Loan might prove to be the best option.

Here’s what you have to usually submit:

• Bank statements for the past two years

• If you are a W-1, the lender will call your employers for a verification of employments

• You will just state you income level on the 1008/1003 (loan application)

If you choose to verify your assets you will have to provide documents for them. if you are only going to state them, you just have to mention them in the loan application.

• CPA letter and/or business license in case you are a self-employed person, which lists out details of more than 2 years of employment in same job or field

Benefits: It is the best form of loan for people who are self-employed and have a steady cash flow from their earnings. The process of home loan approval goes faster as well.

Here’s a tip: This loan type gives you the advantage of taking an interest rate that is the same as that of a fully documented loan.

Look out for this: One thing to be cautious about is that as a self-employed person, taking this kind of loan means you need to be financially sound to pay off the loan installments regularly.

No Document Loan

‘I don’t want anything to do with paperwork for a loan!’. Well, if you are fine with a slightly higher than nominal interest rates, going in for a No Document Loan will benefit you as you do not have to declare your income or give details about where you work.

Benefits: There are many benefits in taking a no document loan. First of all, the process of getting a loan is made simpler, because you don’t have to submit too many forms to get a loan approval. You can borrow amount up to 80% of the value of the home you wish to buy and can even gain by discounts on interest rates for a specific period of time.

Here’s a tip: One thing you have to be prepared to sacrifice here is on the payment of higher interest rates. However, this can be lowered if you produce a tax return. If you choose to take this loan type, you may have to purchase mortgage insurance and also need to have a clean credit history.

Look out for this: Recently these loans have come under much scrutiny as they are labeled “liar loans”. A study found that an overwhelming majority of people misstated their income by as much as 50% in these loans. Be careful as it is a federal crime to lie on information used to secure a home mortgage.