Here you will learn about several types of mortgage income documentation including
Stated Income (SIVA/SISA), No Doc/NINA/NINANE, No Ratio, and other creative financing/limited income documentation options.
As you are probably aware, most mortgage loans funded in the U.S. require documentation of income using pay stubs, tax returns, and W2 or 1099 statements. Most homebuyers or refinance borrowers work for a monthly salary or hourly wage so they do not have difficulty documenting their income. But, for the self-employed mortgage borrower or privacy conscious, busy borrower, the prospect of gathering reams of papers to apply for a mortgage is unappealing. Occasionally, even borrowers on a monthly salary or hourly income may need to use limited income documentation loans because the borrower has mixed income sources or prefers not to disclose income for other reasons.
In the old days (1989, when I started my mortgage career), if a borrower could not or did not want to provide proof of the income listed on a mortgage application, the loan officer had few options. These days, there are so many limited income documentation (aka EZ doc) mortgage options that many mortgage loan officers have difficulty keeping up with the definitions, quirks, and requirements of these programs.
These options include stated income mortgages, no doc mortgages, and no ratio mortgages and they go by acronyms such as SIVA, SISA, FISA, NINA, and NINANE.
In the EZ Doc home loan programs described below, "asset" refers to liquid assets not real estate so, where the program does not require listing of assets, non-liquid assets such as real estate will still have to be listed on the mortgage application. The definitions below are generic and there are few hard-and-fast rules so it pays to read each lender's underwriting guidelines (all one thousand pages of them)!
Here are a few of the myriad non-traditional income documentation options available:
- STATED INCOME, VERIFIED ASSETS (SIVA):
This option is also known as No Income Verification (NIV). The borrower states income on the application but the lender will not verify income; the mortgage lender just verifies assets listed on the mortgage application. Lender underwriting guidelines vary with respect to types of income they will accept and number of months of liquid reserves (assets) required. Many loan officers make the mistake of advising their borrower to list income far in excess of what is required and often unrealistic for the borrower's profile; such an error can lead to the underwriter making an approval "counteroffer" to full doc or turning down the application altogether.
- STATED INCOME, STATED ASSETS (SISA):
Here, the borrower states income and assets both of which must be reasonable for the borrower's profile and also meet varied lender underwriting guidelines. The lender does not verify either assets or income amount. The lender will verify that the borrower is employed or owns a business.
- NO RATIO:
With no ratio home loans, the borrower does not state any income on the application and the lender does not compute a debt-to-income ratio because although the debt is known, the income is not. The lender will typically require verification of a certain number of months (typically 2-6 months) of reserves in liquid assets. Liquid assets can include funds in savings and/or checking accounts or investment accounts.
- NO INCOME, NO ASSET VERIFICATION (NINA):
Pretty self-explanatory; you take the fifth and list no income or assets on the home loan application. Just list your employment info.
- TRUE NO DOC aka NO INCOME, NO ASSET, NO EMPLOYMENT VERIFICATION (NINANE):
The borrower does not even have to allege that he or she is employed let alone have an income source; nor does the borrower need to list any assets.
Many of these "lite income documentation" home loans are available for refinance or purchase; good or bad credit; over a wide range of credit scores; often even for first-time homebuyers with limited credit, or borrowers with collections, charge-offs, mortgage lates, a previous foreclosure or a chapter 13 bankruptcy/chapter 7 bankruptcy.
Each borrower is unique and, as such, there are numerous reasons for not documenting income. Some borrowers are self-employed business owners or recipients of commission or other variable income; others live off investments or non-traditional income sources.
Limited income documentation home loans are not always the best option because they generally cost more than fully documented loans. If a mortgage professional knows what he or she is doing, he/she can qualify some borrowers who think they are lite doc candidates and get them approved through a standard Fannie Mae or Freddie Mac home loan. This does not involve any magic or subterfuge; just solid knowledge of Fannie Mae/Freddie Mac underwriting guidelines and their lending philosophy.
While you may qualify for many of the low doc mortgage programs above, they should be used only when prudent because of the higher interest rates associated with them. As I stated above, lender guidelines are voluminous and constantly changing so your mortgage professional should be a specialist who stays constantly abreast of changes and lender idiosyncrasies.
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