Each and every borrower is unique. Many are paid by their employer on a regular basis and receive a W-2 at year end for tax reporting. For these borrowers a fully documented loan is customary.

Others cannot document their income so easily. Some are paid cash, others are in business for themselves, still others have co-borrowers who do not receive a standard paycheck. In all of these cases some variation of limited documentation loan program is necessary. The 'flavors' of documentation include:

• Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, 6 months of stated income and 2 months of expected monthly housing expense.

• Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.

• No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.

• No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.

• Stated assets or no asset verification: Assets are disclosed but not verified, income is disclosed, verified and used to qualify the applicant.

• No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.

• No income/no assets: Neither income nor assets are disclosed.

Bear in mind that stated income type of loan doesn't mean you can borrow as much as you want, regardless of whether it makes financial sense. A lender may ask you to sign an IRS 4506 form. This form allows the lender to request a copy of your tax returns. Keep in mind that many lenders will not use this form. They will simply hold on to it, using it as a scare tactic to make you tell the truth about your income. If you default on the loan, they may use it as a tool to go after you for fraud.

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