What type of loan typically requires less stringent income documentation?

FHA loans are designed to make homeownership accessible to a broader range of borrowers, especially those with lower income or less-than-perfect credit histories. One of the key features of FHA loans is their flexibility regarding income documentation. The Federal Housing Administration, which backs these loans, allows lenders to utilize alternative methods for verifying income, such as bank statements, instead of relying solely on traditional documentation like tax returns or pay stubs.

This leniency is particularly beneficial for first-time homebuyers or those with non-traditional income sources, allowing them to qualify for a mortgage even if their documentation is not extensive. By facilitating easier access to financing, FHA loans are an appealing option for many prospective homeowners who may struggle with the requirements set by conventional loans or jumbo loans, which typically require stricter income documentation due to their larger amounts and risks. VA loans, while also having favorable features, are specifically targeted towards veterans and active-duty service members, often depending on service-related qualification rather than income levels.