What is Alternative Documentation - Alternative Documentation is xpedited and simpler documentation requirements designed to speed up the loan approval process. Instead of verifying employment with the applicants employer and bank deposits with the applicants bank, the lender will accept paycheck stubs, W-2s, and the borrowers original bank statements.

Alt A and subprime lenders also allow other documentation types such as bank statements, business bank statements, and/or verifcation of employment to satisfy income documentation requirements. Check with your broker to see what programs will work best for you.

Another option to consider if it is difficult or impossible to verify your income, employment and assets is to No-Doc. A No-Doc loan requires No Documentation of income, employment or assets. You do need a good credit score to go No-Doc and will pay a slightly higher interest rate in some cases but if verification of income, assets and employment is a problem, consider going No-Doc.

Only in recent years have we as mortgage professionals been able to work with alt doc type loans. In the past you had to put down 20%, provide proof of everything and have great credit to buy a home. Now we have to ability to pick from multiple loans programs that fit just about anyones profile.

A good example of a borrower who would need to use alternative documentation would be a plumber who works a regular 40 hour per week job but also works after hours and weekends doing "side" jobs. Many such folks earn a significant portion of their overall income this way and would have a difficult time proving this income with traditional methods.

Alternative Documentation (Alt Doc) loans differ from Full Documentation (Full Doc) loans in that Alt Doc loan programs do not require the usual income and assets verifications from a third party (the applicant's employer or the depository bank where the loan applicant keeps the down payment funds). Full Doc loans often require such third party verifications and therefore the underwriting process takes longer.

Any alternative credit accounts you use must have a good payment history and be open for a minimum of 12 months. Canceled rent checks can also be used for an alternative crdit account.

Many times alternative documentation is used for borrowers with no or low credit scores. This is also helps new homebuyers obtain a mortgage for their new home.

It is now possible to obtain an alternative credit report accredited by the National Credit Reporting Association (NCRA).

Fannie Mae's "My Community" program was designed for first time home buyers with limited credit depth. This program will allow up to 100% financing with little or no credit. You will still have to show at least 4 alternative tradelines but your interest rate is much better than going with a sub prime lender.

The usefulness of this documentation type is obvious; it allows the borrower to speed up the process for underwriting. While you may ask your loan agent for this type of documentation, certain restrictions may apply in order to qualify.

Alternative documentation types can allow borrowers with non traditional sources of income to qualify for loans.

Alternative documentation refers to the documents that the lender requires during the lending process. Less information is needed from the borrower regarding income and asset verification. Alternative documentation can speed up the loan process.

Alternative documentation - "I cant prove all of last years income. What is alternative documentation, and is it legal?"

Alternative income documentation - There are many mortgage programs that allow for alternative income documentation. Alternative income documentation is using non-traditional methods of documenting income. Traditional methods would be using pay-stubs, W2 forms and income tax returns. An example of alternative income documentation would be to use a 12 months bank statement program to document income.

You may also elect to choose a stated income loan instead of providing W2's or tax returns to expedite the processing of your loan. With a stated income loan you state your actual income on your loan application but usually the most documentation the underwriter will want is to get a verbal VOE or a copy of your business license to prove you have a job currently and you have had a job for the past 2 years.

Taking this one step further you may also choose to go the stated income/stated asset route. Most lenders require some type of reserves and on stated asset you are not required to show this money.

Alternative income may be stated income, stated assets, 12 month bank statements personal or business, 24 month bank statements personal or business, no income no asset loans and no ratio loans.

When using bank statements as proof of income, some lender banks use the average gross deposits as total income, others use net deposits. Net deposits are gross deposits minus withdrawals. Naturally, a borrower is considered to have higher income if a bank does not include withdrawals in its income calculation. Transfers from one account to another are usually not considered as income.

Alternative income is another way to qualify for a loan. If you cannot qualify the traditional way with paycheck stubs and tax returns the lenders will still work with you. There was at one time a lot of money being lost due to turned down loans because of income. Lenders recognized this and have made adjustments to there lending guidelines. Now there is alternative income, stated income, no income no asset... Just to name a few.