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Stated Income Mortgage Loans Stated Income Mortgage Loans - A stated income mortgage loan is a great mortgage tool for people who cannot verify all of the income that they earn. With stated income mortgages, when you are filling out the mortgage application you will still need to provide all of your employment information, however that information is not verified through standard documentation such as: pay stubs, 1099s, W-2s, etc. If you decide to use a stated income mortgage your interest rate will be higher due to the added risk the lender takes. At any point during the processing of your stated income mortgage loan, the underwriter can request income documents still at his/her own discretion. They may ask for income documents if they deem the income stated on the loan application is not consistent with your job or if they do not feel totally comfortable with your home loan application. There are other types of low or no income documentation loans out there such as, no doc. loans, no ratio loans, bank statement loans, and limited doc. loans. Stated Income Mortgages are ideal for small business owners and those receiving cash tips as a significant portion of their incomes, such as waiters and cab drivers. In many cases State Income Loan may be the only logical loan option as home buyers in these income situations often have difficulty documenting their incomes. The lender will verify the rationality of the income stated for the wage earner is through the Salary.com. If you are at a smaller company, re-wording your job title can give you a little extra room to state more income if the borrower needs it. A stated loan is not an opportunity to inflate or falsify your income in order to purchase a more expensive home then you would normally qualify for. Stated Income Loans do require verification of the existence of your business or employment. Most states have this information available online. If not, then a letter from your accountant/tax preparer verifying your information will satisfy this requirement. For stated income loans for employed borrowers, lenders will usually verify that the income stated is reasonable for your occupation and experience level. Will Stated Income Work for You? - A stated-income loan qualifies a borrower using the income the borrower states on the application form - as opposed to the income the borrower can document. With a stated income loan, the lender agrees not to attempt to verify the income the borrower has stated on the application. Stated income mortgages are ideal for the self-employed and for home buyers in professions with salaries comprised mostly of cash tips, such as waiters and hotel porters. This type of loan applicants can often afford a mortgage, but don't have the necessary pay stubs to document their true earnings. Self-employed business owners whose personal assets are comingled with the business assets often utilize "Stated-Income Stated-Assets" mortgage programs. You are responsible for providing an accurate figure when the loan officer ask's for your income amount. The loan officer should not coach you or fill in the amount for you. If the loan is audited and fraud is discovered you and or the loan officer can be held accountable uner the law. With the use of automated underwriting borrowers with exceptional credit that meet other loan criteria can get a stated income loan or no income verification loan with the same interest rates and fees as borrowers who do provide income verification. For some people a no ratio loan or a no doc loan may be the best route to go (instead of stated income). On a no ratio loan an income figure is not filled in on the loan application and no debt ratio is calculated. On a no doc loan, there is no employement filled in, no income listed and no debt ratio is calculated. These types of loans are higher risk loans and higher rates are usually associated with them. However, some people may have income that an underwriter will not accept for one reason or another and these options may be the better route to go. Temporary disablitly is usually an income that can not be used. Also a person who jumps around from job to job, has large gaps in between jobs, switches their line of work constantly and has no job stability may consider one of these types of loans. A stated income loan is a great loan for people who are W-2ed or self-employed. There are also programs that allow stated income and stated assets on the same loan. These programs help to preserve borrower’s credit by getting them the funds that need when they need them.
Employment will most likely be verified, the income stated will have to be make sense with the type of job submitted on the application. One of the reasons for a stated income loan is to minimize paperwork during the loan application process. A number of requirements that would normally be requested are W2 Statements, 1099 Forms, Bank Statements, and Pay Check Stubs. A stated income loan would not require the borrower(s) to find and organize this information to be approved for a loan. In many cases the interest rate difference is very minimal but normally slightly higher than a loan which requires proof of income. On some stated income programs, the lender may require the borrowers to complete and sign Internal Revenue Service form 4506. This form gives the lender permission to access past and future tax returns of the borrowers. Having a signed and completed 4506 form in the file greatly enhances the marketability of the loan to the secondary market. Some times this loan program has been referred to as "The Liars Loan". It is important to understand, the existance of this loan, is for the purpose of helping borrowers, who otherwise cannot document their Actual Income. It is not designed to ficticiously inflate your income. Though the stated income loan is an attractive loan for many self employed borrowers, always remember that many of the deductions that you take on your business taxes can actually be factored right back into your income for mortgage underwriting purposes. Stated income may be used in lieu of full documentation if you have higher credit scores. Lenders view you as less risky and therefore are willing to dismiss income documentation to speed up the loan process. The rate you receive is contingent on specific loan to value and/or down payment restrictions. Lenders will often check with widely-availalbe salary survey sources like salary.com to determine whether or not the income stated is consistent with the borrower's profession and title. Can wage earners get stated income loans? - Stated income loans used to be for the self employed or hard to prove income. That is not the case anymore. Wage earners can get stated income loans but there may be more restrictions, higher rates, and lower loan to values. Wage earners that use stated income loans usually have other income that is hard to document. The point of a stated income loan is for borrowers that have difficulty PROVING the income. Make sure with a stated income loan, that the mortgage payment you will receive will be something you can live with in the future. You can use a stated income loan for any income that you can't or do not want to provide income documentation for, including wage earners. The amount of income you state has to make sense for your profession. For example you cannot say that you work as a cashier at Wal-Mart and make $300,000 a year. Underwriters normally use a website such as Salary.com to check the average salary for a given profession in a specific geographic area.
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Information listed above is to be used for educational purposes only and is not guaranteed
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