The 12 Month Reduced Doc Mortgage Program allows qualified self-employed and W-2 borrowers to use one year of income documentation rather than relying on a traditional two-year income average.
This can be particularly useful for borrowers whose most recent year shows stronger income than the preceding year, including newer business owners, self-employed borrowers with improving income, and wage earners whose earnings have recently increased.
Purchase, refinance, and cash-out options are available, with loan amounts up to $3,500,000 and financing up to 90% LTV, subject to credit score, occupancy, property type, and underwriting requirements.
Reduced Income and Employment Documentation
Traditional full-documentation mortgage underwriting commonly evaluates income over a two-year period.
For self-employed borrowers, that approach can be restrictive when:
- The most recent year shows significantly higher income
- Business tax deductions reduce taxable income
- A newer business has limited operating history
- Averaging two years of income produces a lower qualifying figure
This program may allow the lender to qualify the borrower using the most recent 12 months of acceptable income documentation instead.
One Year Income Documentation
Depending on the borrower type, qualifying documentation may include:
- One year of personal and/or business tax returns
- One year of W-2 income documentation
- Supporting employment verification as required
- Additional documentation when necessary to establish income stability and continuance
The program is available to both self-employed borrowers and W-2 wage earners.
Self-Employed Borrowers
A traditional full-doc mortgage may require the lender to average income over the preceding two years.
Under this reduced-documentation program, qualified self-employed borrowers may be able to use the most recent year’s income only, which can avoid the impact of a lower prior-year income figure.
W-2 Wage Earners
Qualified wage earners may also be eligible to use one year of W-2 income documentation rather than a full two-year documentation history.
First-time homebuyers may be eligible.
Credit Score, LTV and Loan Amounts
Maximum financing varies by credit score and loan amount.
Credit Score Maximum LTV Maximum Loan Amount:
| Credit Score | Loan-to-Value | Loan Amount |
| 680 | 90% LTV | $1,000,000 |
| 680 | 85% LTV | $1,500,000 |
| 680 | 80% LTV | $2,000,000 |
The program has a minimum credit score of 640, but the highest LTV tiers require stronger credit as shown above.
Interest-Only Option
Interest-only financing may be available up to 85% LTV, subject to credit score, loan amount, occupancy, and other underwriting requirements.
Eligible Property Types and Maximum LTV
Eligible property types may include:
- Single-family residence: up to 90% LTV
- Warrantable condominium: up to 85% LTV
- Non-warrantable condominium: up to 85% LTV
- Duplex: up to 85% LTV
- Townhome / townhouse
- 2-unit property: up to 85% LTV
- 3-unit property: up to 80% LTV
- 4-unit property: up to 75% LTV
Maximum LTV is also subject to credit score, occupancy, transaction type, and loan amount.
Eligible Occupancies
The program may be available for:
- Primary residences
- Second homes
- Investment properties
Investment Property Financing
Investment property financing may be available up to:
- 85% LTV for qualifying purchase and rate-and-term refinance transactions
- 80% LTV for qualifying cash-out refinance transactions
Lower limits may apply based on property type and other underwriting factors.
Credit Requirements
General credit guidelines include:
- Minimum credit score: 640
- Chapter 13 bankruptcy: minimum 12 months after discharge
- Chapter 7 bankruptcy: minimum 24 months after discharge
- Foreclosure: minimum 2 years
- Short sale: minimum 2 years
- Loan modification: minimum 2 years
- Housing history may allow one 30-day late payment during the previous 12 months
All seasoning requirements remain subject to the lender’s current underwriting guidelines.
Tradeline Requirements
The primary borrower generally should have:
- At least two open tradelines
- Minimum 2-year credit history for qualifying tradelines
Tradelines such as the following may not satisfy the lender’s standard tradeline requirement:
- Authorized-user accounts
- Deferred-payment accounts
- Certain student loan accounts
Specific tradeline requirements may vary depending on the borrower’s overall credit profile.
Additional Program Highlights
Additional features may include:
- First-time homebuyers permitted
- Gift funds permitted
- Purchase financing
- Rate-and-term refinance
- Cash-out refinance
- Interest-only financing available
- Loan amounts up to $3,500,000
- Reduced 12-month income documentation
Submit a Loan Scenario Without a Credit Check
Borrowers can submit a loan scenario for an initial review without requiring an upfront credit check.
Loan Scenario Form – Credit Check Not Required
States Where the Program Is Available
The 12 Month Reduced Doc Mortgage Program is available in:
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and Wisconsin.
Last Updated on 1 month ago by Broker Mortgages