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Why Would I Want a Stated Income Loan?
Why would I want a stated income loan? For
many consumers, especially those that are self-employed
there are various reasons as to why your income
documentation may not be acceptable to a lender even
though you may make enough money to qualify for a
mortgage. Thus, lenders have programs where they allow
you to state your income and you do not have to show
income documentation. For this convenience you will be
charged a slightly higher rate than most other people
using full income documentation but for the ease and
simplicity it can be well worth it. A stated income loan
is not to be abused and you should not lie about your
income as you should always state how much you actually
make on the loan application.
My loan officer says we are doing a stated income loan. Why
don't they want to see my tax returns or pay stubs? Stated income loans are much easier to close than full doc loans. One example of a reason that you might need a stated income loan is if you are self employed, and claim significant tax write offs to minimize your taxable income. While this is good for your tax status, most lenders will not be able to use your "real" income and base your debt to income ratios on your taxable income. Do you have very high credit scores? If so, many lenders will allow you to use a stated income program with little or no increase to the interest rate. High FICO customers are seen as a low risk to lenders so lenders often reduce the burden of gathering documentation in order to earn your business. If you have very high credit scores you should ask your mortgage broker if a stated income program is right for you. Stated Income mortgage is ideal for home buyers with incomes that are difficult to document. People who receive a good portion of their income in the form of cash tip, such as waiters, taxicab drivers and street vendors may not have paycheck stubs to prove their true earnings. Stated Income loans are created with these homeowners in mind. Stated income loans should NOT be used to exaggerate your income. If you use a stated income loan to claim you make more money than you do, you are committing mortgage fraud. Any and all sources of income that is un-documentable would be taken into consideration for a stated income loan. Side jobs where you are paid all cash, is an example of money that would be considered. Many of those who would not have qualified on a Full Doc Loan will have the option of going with a Stated Income Loan. Stated income loans are for document relief and not to be used as a way to qualify for a loan in which you cannot afford by falsifying your income. Qualifying for a loan by way of the stated income program can put you in a very tough financial situation if you are not honest with your true income. An alternative to stated income loans is by using bank statements to qualify as income. Stated income and bank statement loans are there for non traditional income sources and should not be used just for anybody. Stated Loans give a little more flexibility when it comes to
particularly income. With more flexibility does come more requirements particularly from the credit score necessary to qualify. Often you simply don't have a choice. Sometimes a stated loan is the only way to make a
particular loan work. If this is the case with you, make sure you understand exactly what is going on with your loan and why your having to go stated. A growing number of mortgage companies require borrowers who want a stated income mortgage, whether they are buying a house or refinancing, to complete an IRS form allowing the lender to verify whether or not the borrower files taxes.
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Information listed above is to be used for educational purposes only and is not guaranteed
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