Documentation
Pieces of paper containing official information [Cambridge Dictionary].
Documentation is a documentation process designed to expedite loan approval, where the lender accepts certain documents from the borrower as verification of income made on the loan application. Typical documentation for loans consists of tax returns or the submission of documentation that is verifiable with a third-party service. Alternative documentation involves the borrower providing an assortment of financial documents that may include W-2s, paycheck stubs, and bank statements. Alternative documentation loans are often offered only to those with excellent credit. The decision is heavily dependent on the applicant's credit score. These loans typically offer more flexibility than conventional, traditional loans. Alternative documentation loans might be a good option for borrowers with unique situations, such as the self-employed or recently divorced. The lender accepts the borrower's documentation without necessarily needing to go through a time-consuming process verifying all the information. Confirming a borrower's information in this manner is considerably quicker than verifying such information with third parties. Alternative documentation loans became popular in the aftermath of the 2008 financial crisis. There are some reasons for this. They offer a much simpler closing process as compared to traditional loans. Alternative documentation loans also appeal to freelancers, an income group whose share of the economy has increased since the crisis. The passage of the ability-to-repay rule, which allows lenders to make good-faith loans based on their assessment of the borrower, also facilitated the rise of alternative documentation loans [Investopedia].
Documentation. Cambridge Dictionary. Retrieved from: https://dictionary.cambridge.org/dictionary/english/documentation
Kagan, J. (2022). Alternative Documentation. Investopedia. Retrieved from: https://www.investopedia.com/terms/a/alternative_documentation.asp