Full documentation loans California
You work a regular job. Get a W2 every January. Direct deposit twice a month. Tax returns filed on time. You’re the perfect borrower.
Then someone tells you about bank statement loans or asset depletion. You’re confused. Why complicate things? You’ve got a paycheck. Use it.
Smart thinking. Full documentation loans are still king. Best rates. Best terms. Lowest costs. When your situation fits traditional lending, use traditional lending.
Been doing mortgages since the ’80s. Full doc loans built this industry. Still the gold standard. 75% of California mortgages use full documentation. There’s a reason.
What Full Documentation Means
Simple concept. You prove income the old-fashioned way. Pay stubs. W2s. Tax returns. Lender verifies everything with your employer. Done.
Why lenders love it: Zero guesswork. Your income is what it is. No calculation formulas. No percentage adjustments. Straightforward verification.
Why you love it: Best rates available. 0.5% to 2% lower than alternative doc programs. On a $600k loan at 6% versus 7%, that’s $358 monthly difference. Over 30 years? $128,880 saved. Real money.
Had a teacher client last year. Salaried position. Five years employment. 680 credit. 10% down. Full doc conventional at 6.375%. Her friend used bank statements because she didn’t understand she qualified for better. Friend paid 7.125% for same situation. That 0.75% difference cost $280 monthly. Over 30 years? $100,800 more. Teacher saved six figures by using proper documentation.
What You Need
W2 employees:
- Last 2 years W2s
- Most recent 30 days pay stubs
- That’s usually it
Tax returns? Not always. Simple W2 salaried income? Pay stubs and W2s handle it. Overtime or commission? Then they want tax returns to average variable income.
Employment verification: Lender contacts your HR department. Confirms you work there. Salary. Start date. Still employed. Takes 5 minutes.
Had a nurse client with straightforward salary. No bonuses. No overtime. Just base pay. Submitted two W2s and one pay stub. Approved. No tax returns needed. Simple situations stay simple.
Credit Requirements
Different programs, different standards.
FHA loans: 580 credit minimum. 3.5% down.
Conventional loans: 620 credit typically. 3% down for first-time buyers. 5% for repeat buyers.
VA loans: Flexible credit. No minimum usually. Zero down.
Jumbo loans: 700+ credit usually. 10-20% down.
Higher credit = better rate. Every 20 points matters.
640 versus 660? Different price tier. 680 versus 700? Better tier. 720 versus 740? Even better. 760+? Best pricing available.
Had two clients last month. Both $650k loans. Both 10% down. Same lender.
Client A: 640 credit. Rate was 6.875%. Client B: 740 credit. Rate was 6.125%.
That 100-point credit difference? 0.75% rate difference. $298 monthly difference. $107,280 over 30 years. Credit scores matter tremendously.
Employment History
Lenders want two years same job or same field. Shows stability.
Job changes in same industry? Fine. Teacher to teacher. Nurse to nurse. Engineer to engineer. No problem.
Promotion or raise? Great. Strengthens application. Shows career progression.
Career change? Needs explanation. Teacher to sales? They’ll ask why and whether new income is stable.
Employment gaps? Depends. Three-month gap between jobs? Explain it. Clean story usually works. Two-year gap with no explanation? Tougher.
Had a client who left tech for year-long sabbatical traveling Asia. Then got hired by another tech company at higher salary. Gap was documented. New income verified. Approved. Clean explanation overcame the gap.
Another client got laid off, took 6 months finding work, finally landed something making 30% less. Gap plus income drop? Denied. Lenders got nervous about stability.
Income Calculation
Salaried W2: Easy. Your salary is your salary.
Hourly W2: Use average hours from last 2 years if overtime varies.
Bonus income: Need 2 years history. They average it. $10k bonus one year, $8k next year? $9k average.
Commission: Same deal. Two years history. Averaged.
Declining income? Problem. Income dropped 20% year over year? Lender uses lower amount or denies loan. They want stable or rising income.
Had a salesman making $95k one year, $87k the next. Income trend down 8%. Lender used $87k for qualification. Limited his buying power but he got approved.
Another salesman. $110k one year, $72k the next. Down 35%. Denied. Too much decline. Lender thought his industry was failing.
Debt-to-Income Ratios
Your total monthly debts ÷ gross monthly income = DTI ratio
Most programs cap at 43% to 50% depending on loan type.
Example: Make $8,000 monthly gross. Have $1,200 car payment plus $500 student loans plus $3,300 proposed house payment. Total debts = $5,000. DTI = 62.5%. Too high. Won’t approve.
Compensating factors help:
- High credit (740+)
- Big down payment (20%+)
- Large reserves (12+ months)
- Low housing ratio (payment under 28% of income)
Had a client with 48% DTI but 800 credit and 25% down payment. Approved conventional. Compensating factors overcame higher ratio.
Another client. 52% DTI. 640 credit. 5% down. Zero reserves. Denied. Too many risk factors.
Loan Programs Available
Full doc opens everything.
Conventional: 3% to 20% down. Best rates. MI drops at 20% equity.
FHA: 3.5% down. Flexible credit. MI for loan life.
VA: Zero down. No MI. Veterans only.
USDA: Zero down. Rural areas. Income limits.
Jumbo: Above conforming limits. Need excellent credit. 10-20% down.
Each program has specific rules. We match your situation to best program for your needs.
Had a first-time buyer with 640 credit and 3.5% down. FHA was perfect fit. Flexible credit guidelines. Lower down payment. Got them in a house.
Another client. 760 credit. 15% down. $1.1M home. Jumbo conventional. Excellent rate. No issues.
Down Payment Options
Zero down:
- VA loans (veterans)
- USDA loans (eligible areas)
3% down:
- Conventional first-time buyer programs
- CalHFA programs with down payment assistance
3.5% down:
- FHA loans
5-20% down:
- Conventional repeat buyers
- Investment properties
- Better pricing tiers
More down = better rate. 5% versus 15% down? Different pricing. 20% versus 10%? Even better pricing and no mortgage insurance.
Had a client with 5% down. Rate was 6.5%. Decided to put 15% down instead. Rate dropped to 6.125%. That 0.375% saved $138 monthly on $600k loan. Plus lower MI. Total savings $215 monthly. Made the higher down payment worth it.
Variable Income
Bonus, commission, overtime need special handling.
Two years history required. Tax returns show it. W2s show it. Lender averages the amount.
Declining trend? They might not use it. If overtime dropped 40% year-over-year, they assume it’s going away.
Recent increase? They won’t use it yet. Need two years of the higher amount to count.
Had a police officer with 3 years overtime history. $85k base plus $18k average overtime. Qualified him at $103k. Overtime was stable and documented. Worked perfectly.
Another officer. Just started overtime shifts 8 months ago. Only qualified him at base $85k. Not enough history on the overtime yet. Bought smaller house. Will refinance when he has 2 years of overtime history.
Why Full Doc Beats Alternative Programs
Rate advantage: 0.5% to 2% lower than bank statement or asset depletion programs.
Program access: Every loan type available. Alternative programs limit your options.
Down payment: Standard requirements. Alternative programs often need 15-25% down.
Underwriting: Automated systems. Fast approvals. Alternative programs need manual underwriting taking longer.
Costs: Standard fees. Alternative programs add extra charges for manual underwriting and verification.
Had a self-employed client who could qualify full doc by averaging his 2 years tax returns. Chose that over bank statements. Got 6.5% rate instead of 7.5%. Saved $357 monthly on $650k loan. Over 30 years? $128,520 saved. Smart choice.
Processing Timeline
Pre-approval: 1-3 days once we have documents. Automated underwriting spits out approval in minutes.
Full approval: 30-45 days typical from application to closing.
Fastest approvals: Salaried W2. No bonuses. No complications. Clean credit. These close in 25-30 days easy.
Slower approvals: Commission income. Recent job change. Credit issues. Student loan complexities. Allow 45 days.
Common Documentation Issues
Unexplained deposits: Got $10k deposited to checking last month? Need explanation. Gift? Document it. Sale of something? Show paperwork. Lender needs to know it’s not borrowed money.
Gaps in pay stubs: Missing a pay period? Need explanation. Were you on unpaid leave? Did you just start? Lender wants continuous income.
Job title mismatch: W2 says one thing, pay stub says another, employer verification says third thing. Confuses underwriter. Get HR to clarify in writing.
Recent tax returns: Filed 2024 taxes last week? Underwriter wants official IRS transcript. Takes time to process. File taxes early if buying soon.
Had a client with $8k deposit to checking from selling a motorcycle. No documentation of the sale. Underwriter couldn’t verify source. Client had to prove it wasn’t a loan. Found old Craigslist ad. Bill of sale. Copy of title transfer. Finally cleared it. Delays happen with undocumented money.
Down Payment Assistance
California’s got dozens of DPA programs. Full doc loans qualify for all of them.
CalHFA: 3.5% to 5% down payment assistance. Second mortgage or grant programs.
County programs: Every county has different options. Some offer grants. Some offer silent seconds. Some offer principal reduction.
Employer programs: Teachers, healthcare workers, municipal employees often get special programs.
We know these programs inside out. Match you with best available assistance for your situation.
Had a teacher couple qualify for CalHFA plus county teacher assistance. Combined programs gave them $35,000 toward down payment and closing costs. Turned 3.5% down they struggled to save into fully-funded down payment with cash left over.
Bottom Line
Got a W2? File taxes? Work regularly? Full documentation loans give you the best possible mortgage terms available. Lowest rates. Best programs. Standard down payments.
Don’t overcomplicate your situation. Alternative doc programs exist for people who need them. Self-employed with write-offs. Retirees without income. Asset-rich borrowers. If that’s not you, stick with full doc.
Been doing these for 40 years. Full doc approvals happen daily. Process is straightforward when your situation fits. Check our FAQ for more questions or call (510) 589-4096 to get started.
You work a regular job. Get a W2 every January. Direct deposit twice a month. Tax returns filed on time. You’re the perfect borrower.
Then someone tells you about bank statement loans or asset depletion. You’re confused. Why complicate things? You’ve got a paycheck. Use it.
Smart thinking. Full documentation loans are still king. Best rates. Best terms. Lowest costs. When your situation fits traditional lending, use traditional lending.
Been doing mortgages since the ’80s. Full doc loans built this industry. Still the gold standard. 75% of California mortgages use full documentation. There’s a reason.
What Full Documentation Means
Simple concept. You prove income the old-fashioned way. Pay stubs. W2s. Tax returns. Lender verifies everything with your employer. Done.
Why lenders love it: Zero guesswork. Your income is what it is. No calculation formulas. No percentage adjustments. Straightforward verification.
Why you love it: Best rates available. 0.5% to 2% lower than alternative doc programs. On a $600k loan at 6% versus 7%, that’s $358 monthly difference. Over 30 years? $128,880 saved. Real money.
Had a teacher client last year. Salaried position. Five years employment. 680 credit. 10% down. Full doc conventional at 6.375%. Her friend used bank statements because she didn’t understand she qualified for better. Friend paid 7.125% for same situation. That 0.75% difference cost $280 monthly. Over 30 years? $100,800 more. Teacher saved six figures by using proper documentation.
What You Need
W2 employees:
- Last 2 years W2s
- Most recent 30 days pay stubs
- That’s usually it
Tax returns? Not always. Simple W2 salaried income? Pay stubs and W2s handle it. Overtime or commission? Then they want tax returns to average variable income.
Employment verification: Lender contacts your HR department. Confirms you work there. Salary. Start date. Still employed. Takes 5 minutes.
Had a nurse client with straightforward salary. No bonuses. No overtime. Just base pay. Submitted two W2s and one pay stub. Approved. No tax returns needed. Simple situations stay simple.
Credit Requirements
Different programs, different standards.
FHA loans: 580 credit minimum. 3.5% down.
Conventional loans: 620 credit typically. 3% down for first-time buyers. 5% for repeat buyers.
VA loans: Flexible credit. No minimum usually. Zero down.
Jumbo loans: 700+ credit usually. 10-20% down.
Higher credit = better rate. Every 20 points matters.
640 versus 660? Different price tier. 680 versus 700? Better tier. 720 versus 740? Even better. 760+? Best pricing available.
Had two clients last month. Both $650k loans. Both 10% down. Same lender.
Client A: 640 credit. Rate was 6.875%. Client B: 740 credit. Rate was 6.125%.
That 100-point credit difference? 0.75% rate difference. $298 monthly difference. $107,280 over 30 years. Credit scores matter tremendously.
Employment History
Lenders want two years same job or same field. Shows stability.
Job changes in same industry? Fine. Teacher to teacher. Nurse to nurse. Engineer to engineer. No problem.
Promotion or raise? Great. Strengthens application. Shows career progression.
Career change? Needs explanation. Teacher to sales? They’ll ask why and whether new income is stable.
Employment gaps? Depends. Three-month gap between jobs? Explain it. Clean story usually works. Two-year gap with no explanation? Tougher.
Had a client who left tech for year-long sabbatical traveling Asia. Then got hired by another tech company at higher salary. Gap was documented. New income verified. Approved. Clean explanation overcame the gap.
Another client got laid off, took 6 months finding work, finally landed something making 30% less. Gap plus income drop? Denied. Lenders got nervous about stability.
Income Calculation
Salaried W2: Easy. Your salary is your salary.
Hourly W2: Use average hours from last 2 years if overtime varies.
Bonus income: Need 2 years history. They average it. $10k bonus one year, $8k next year? $9k average.
Commission: Same deal. Two years history. Averaged.
Declining income? Problem. Income dropped 20% year over year? Lender uses lower amount or denies loan. They want stable or rising income.
Had a salesman making $95k one year, $87k the next. Income trend down 8%. Lender used $87k for qualification. Limited his buying power but he got approved.
Another salesman. $110k one year, $72k the next. Down 35%. Denied. Too much decline. Lender thought his industry was failing.
Debt-to-Income Ratios
Your total monthly debts ÷ gross monthly income = DTI ratio
Most programs cap at 43% to 50% depending on loan type.
Example: Make $8,000 monthly gross. Have $1,200 car payment plus $500 student loans plus $3,300 proposed house payment. Total debts = $5,000. DTI = 62.5%. Too high. Won’t approve.
Compensating factors help:
- High credit (740+)
- Big down payment (20%+)
- Large reserves (12+ months)
- Low housing ratio (payment under 28% of income)
Had a client with 48% DTI but 800 credit and 25% down payment. Approved conventional. Compensating factors overcame higher ratio.
Another client. 52% DTI. 640 credit. 5% down. Zero reserves. Denied. Too many risk factors.
Loan Programs Available
Full doc opens everything.
Conventional: 3% to 20% down. Best rates. MI drops at 20% equity.
FHA: 3.5% down. Flexible credit. MI for loan life.
VA: Zero down. No MI. Veterans only.
USDA: Zero down. Rural areas. Income limits.
Jumbo: Above conforming limits. Need excellent credit. 10-20% down.
Each program has specific rules. We match your situation to best program for your needs.
Had a first-time buyer with 640 credit and 3.5% down. FHA was perfect fit. Flexible credit guidelines. Lower down payment. Got them in a house.
Another client. 760 credit. 15% down. $1.1M home. Jumbo conventional. Excellent rate. No issues.
Down Payment Options
Zero down:
- VA loans (veterans)
- USDA loans (eligible areas)
3% down:
- Conventional first-time buyer programs
- CalHFA programs with down payment assistance
3.5% down:
- FHA loans
5-20% down:
- Conventional repeat buyers
- Investment properties
- Better pricing tiers
More down = better rate. 5% versus 15% down? Different pricing. 20% versus 10%? Even better pricing and no mortgage insurance.
Had a client with 5% down. Rate was 6.5%. Decided to put 15% down instead. Rate dropped to 6.125%. That 0.375% saved $138 monthly on $600k loan. Plus lower MI. Total savings $215 monthly. Made the higher down payment worth it.
Variable Income
Bonus, commission, overtime need special handling.
Two years history required. Tax returns show it. W2s show it. Lender averages the amount.
Declining trend? They might not use it. If overtime dropped 40% year-over-year, they assume it’s going away.
Recent increase? They won’t use it yet. Need two years of the higher amount to count.
Had a police officer with 3 years overtime history. $85k base plus $18k average overtime. Qualified him at $103k. Overtime was stable and documented. Worked perfectly.
Another officer. Just started overtime shifts 8 months ago. Only qualified him at base $85k. Not enough history on the overtime yet. Bought smaller house. Will refinance when he has 2 years of overtime history.
Why Full Doc Beats Alternative Programs
Rate advantage: 0.5% to 2% lower than bank statement or asset depletion programs.
Program access: Every loan type available. Alternative programs limit your options.
Down payment: Standard requirements. Alternative programs often need 15-25% down.
Underwriting: Automated systems. Fast approvals. Alternative programs need manual underwriting taking longer.
Costs: Standard fees. Alternative programs add extra charges for manual underwriting and verification.
Had a self-employed client who could qualify full doc by averaging his 2 years tax returns. Chose that over bank statements. Got 6.5% rate instead of 7.5%. Saved $357 monthly on $650k loan. Over 30 years? $128,520 saved. Smart choice.
Processing Timeline
Pre-approval: 1-3 days once we have documents. Automated underwriting spits out approval in minutes.
Full approval: 30-45 days typical from application to closing.
Fastest approvals: Salaried W2. No bonuses. No complications. Clean credit. These close in 25-30 days easy.
Slower approvals: Commission income. Recent job change. Credit issues. Student loan complexities. Allow 45 days.
Common Documentation Issues
Unexplained deposits: Got $10k deposited to checking last month? Need explanation. Gift? Document it. Sale of something? Show paperwork. Lender needs to know it’s not borrowed money.
Gaps in pay stubs: Missing a pay period? Need explanation. Were you on unpaid leave? Did you just start? Lender wants continuous income.
Job title mismatch: W2 says one thing, pay stub says another, employer verification says third thing. Confuses underwriter. Get HR to clarify in writing.
Recent tax returns: Filed 2024 taxes last week? Underwriter wants official IRS transcript. Takes time to process. File taxes early if buying soon.
Had a client with $8k deposit to checking from selling a motorcycle. No documentation of the sale. Underwriter couldn’t verify source. Client had to prove it wasn’t a loan. Found old Craigslist ad. Bill of sale. Copy of title transfer. Finally cleared it. Delays happen with undocumented money.
Down Payment Assistance
California’s got dozens of DPA programs. Full doc loans qualify for all of them.
CalHFA: 3.5% to 5% down payment assistance. Second mortgage or grant programs.
County programs: Every county has different options. Some offer grants. Some offer silent seconds. Some offer principal reduction.
Employer programs: Teachers, healthcare workers, municipal employees often get special programs.
We know these programs inside out. Match you with best available assistance for your situation.
Had a teacher couple qualify for CalHFA plus county teacher assistance. Combined programs gave them $35,000 toward down payment and closing costs. Turned 3.5% down they struggled to save into fully-funded down payment with cash left over.
Bottom Line
Got a W2? File taxes? Work regularly? Full documentation loans give you the best possible mortgage terms available. Lowest rates. Best programs. Standard down payments.
Don’t overcomplicate your situation. Alternative doc programs exist for people who need them. Self-employed with write-offs. Retirees without income. Asset-rich borrowers. If that’s not you, stick with full doc.
Been doing these for 40 years. Full doc approvals happen daily. Process is straightforward when your situation fits. Check our FAQ for more questions or call (510) 589-4096 to get started.