If you're buying a new home or just refinancing an existing one it's important to be prepared; get all your ducks in a row before you begin shopping for a lender. When you do find a lender you want to work with, and a broker you think you can trust, make sure you're both on the same page before he submits your loan. Once the engineers get a hold of it it's difficult to change things, and once the underwriters get it, it's impossible.
One of the first things you should do is figure out your income situation. Who will be the primary borrower and how are you going to prove your income. Lenders consider the borrower with the greatest income to be the primary borrower and sometimes that creates a problem. What do you do if the one who makes the money has the worst score? That's a hard one to work out, but there may be a way around that.
Sometimes borrowers have multiple sources of income and their W-2s only show part of it. If that's the case with you, you might try using bank statements in lieu of Full Doc. If you do this, you have to have your W-2 income directly deposited into your bank account or you can not use it. How this works is pretty simple. Your Loan Officer will simply add up all your deposits for twelve months of statements, then dividend by twelve. Whatever that number is, becomes your monthly income figure. Some lenders will require eighteen months or two years of statements, usually to be determined by the loan to value you're using. When you present your statements you have to show complete statements, even if it's a hundred pages. The lender needs to make sure that your deposits are not just moving money from one account to another. I once went through nearly three hundred pages and it was not fun. If you do this program then you can choose who will be declared as your main income earner and primary borrower so long as the story makes sense. If you claim your wife is the fireman who made all the money and you're the housewife it might be a tough sell to the underwriters. If you have a lot of NSF, or non-sufficient funds on your bank statements you may not be allowed to use them. You'll just have to ask your lender. Each one will have different guidelines about this.
What happens if all your money is in a business bank account, can you still use those bank statements? That will also depend on the lender. The ones I worked for allowed it so long your mortgage was paid from that account. Or if you did not have a mortgage you had to be able to prove your other bills were paid from that account.
And there you have it; bank statements in Lieu of Full Doc. It requires a lot of paperwork and is a serious pain but it just may get you the best possible rate on your loan. Before you go this route make sure you do the numbers first. Add up all the deposits, divide by twelve and then see if that is enough income to do the loan. Good luck and happy borrowing.