It's tough to pick a loan. There are many mortgage programs -- I've got access to about 70 -- and innumerable combinations of rates, points, and terms. And to further confuse the process, different loans have different documentation requirements, some of which require more paperwork than an IRS audit.

What are the terms you're likely to hear?

• Full Doc.
• Stated Doc.
• Alternate Doc.
• No Doc.
• Low Doc.
• And, of course, What's Up Doc?

It certainly pays to know what type of documentation is required to close a mortgage. Some loans require far less paperwork than others, usually when a borrower has both good credit and a large down payment.

You want less paperwork and fewer requirements where possible because complex loan prerequisites may block or delay your ability to get a mortgage. For instance, one loan program may require two years of self employment while another says one year is okay. Or, one mortgage plan may require tax returns to document income, returns not yet back from the accountant, while another program lacks such a requirement.

With lesser documentation requirements, you're less dependent -- and perhaps not dependent at all -- on the willingness of other people to confirm your income, assets, and debts. If a bank manager, employer or whoever fails to send out a lender form, if it gets lost in the mail, if it's not signed or properly completed, your loan application can be delayed, closing might be put off and your lock-in could be lost. With reduced documentation requirements such potent problems can be largely eliminated.

A fully documented loan is just that, every bit of information in the file must be verified, usually in writing from third party sources. If you state on your application that you're a store branch manager, that's great -- and the lender will want your employer to verify the information. Have a bank account? Instead of looking at statements, with full docs your lender will ask your bank to complete a questionnaire, sign it, and return it directly to the lender's office.

An alternative documentation loan requires less paperwork and fewer verifications; today it's probably the most popular sort of documentation. Alt doc processing -- which is similar to and sometimes called "low doc" processing -- might ask for a paycheck stub and a W-2 in lieu of written verifications from your employer. Three month's consecutive bank and investment statements will serve instead of waiting for your banker or financial adviser to mail them.

Some loans may only require your lender to simply telephone your boss and confirm that you work there and how much you make. Stated documentation loans are more liberal and allow a lender to simply take your word for what you "stated" on your application.

If you say you make $10,000 per month, lenders will take your word for it. Honest. But instead of verifying your income they'll look at other parts of your financial personality to see if your monthly income seems to make sense.

If, for example, you wrote $10,000 per month on your loan application, the lender will review your current debt load and savings ability. If you only have one $250 car payment each month and very little money saved in the bank, the lender may wonder: "If you make so much money, where is it?"

If -- on the other hand -- you can show consistent savings and good cash flow, no income verification may be needed. With stated docs many lenders require six months worth of stated income or certain minimum cash balance, depending on the loan amount.

Some words of caution: Borrowers should use care when completing loan applications. If you say you make $10,000 a month and actually make $10,500 no one will mind. If you only make $8,700 you won't get the loan and there could be big problems.

A no documentation loan is pretty straightforward. The lender verifies nothing except your credit. Are these types of loans more risky? Of course, that's why lenders in certain circumstances will ask for more money down or for a higher interest rate to offset any risk associated with this type of documentation. Typically, the lower degree of documentation, the higher your rate or bigger your down payment will be.

There are a variety of loan documentation options, so be sure to ask your lender about paperwork requirements. Your lender will likely prefer the least amount of documentation possible consistent with your loan program and circumstances. Why? Reduced documentation loans save the lender time and hassle, too!

For more articles by David Reed, please press here.