Lite Doc

For whatever reason, it is sometimes the case that a borrower will not be able to prove his or her income. Perhaps it is due to the fact that the borrower is self-employed, or has recently taken a new job, but they cannot produce the documentation required to secure a conforming loan (i.e. a loan that strictly adheres to bank funding criteria.)

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While this can be a frustrating situation, there is light at the end of the tunnel. For those who find it difficult to verify their income there is the option of a lite doc loan. A lite doc loan is essentially a loan that does not require the borrower to produce the same proof of income documentation as with a conforming loan.

While many mortgage lenders offer the option of lite doc loans, they all require different levels of documentation. While some lenders will accept a simple signed declaration stating the income of the borrower, most will require at least one pay stub, or copies of bank statements going back up to 24 months.

One of the disadvantages of the lite doc loan is that, as you would expect, the interest rate will be slightly higher than with a conforming loan. This is to compensate for the additional risk the lender takes on in lending money to a borrower with unverified income.

Of course, for borrowers who have difficulty proving their income the lite doc loan is a godsend, and the benefits of qualifying for a mortgage far outweigh the inconvenience of the extra interest charge.