What exactly does "full doc" mean? It is used regularly when talking mortgage speak and we say it just thinking we and the people we know have the same mind picture when we say it. So, when a loan officer says full doc exaclty what are they saying?
Full doc means fully documented. When speaking of income it means when the borrower is able to provide all of the documentation required by the loan guidelines to prove their income. Usually it means the last two years of tax returns and the most recent month's worth of pay stubs. We say month's worth because it may be 2 checks or it could be 4 checks or it could be another number. We want to see how much the borrower actually earned in the last 30 days in case there is an up trend, or down trend, in their income.
Different loan programs have different guidelines. For example if you are dealing with a real estate investor who has written off depreciation or a big one time repair on their investment property that amount may be able to be added back to the Adjusted Gross Income. So while using the AGI line only the borrower may not meet the required Debt-To-Income ratio but when adding back repairs and depreciation they do.
Borrowers who have not recieved their previous year's tax returns because they have filed an extension will usually be asked for the previous three year's tax returns but using the most recent year's extension. The extension must also be shown.
The other choices would be stated income, which is very rare today, or bank statements as full doc. Bank statements as full doc are also rare but in that case the lender would ask for all pages of all bank statements during the required period.
If you have any questions about what a full doc loan is feel free to call!
THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.
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NOTICE: I have been writing in this blog since July 2006. Some of the older articles may contain information that has changed. Please check the date and phone me if you have any questions.
I know that there are a lot of buyers that don't know all of this junk... and a lot of us that toss it around as if it is the simplest thing in the world.
Jennifer - thank you. I fell behind this weekend but will "catch up" next week.
Lisa - thank you and thanks for commenting.
Lane - I think every industry does the same thing and the poor customer, if they have a problem with not knowing everything, just goes along like they know what they are talking about. Thanks for commenting.
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Ken Thanks again for another great post, I look for to the next.