Stated Income Loan
Stated income loan programs are offered on fixed rate mortgages, adjustable rate mortgages, or on negative amortization mortgages. They do not require income verification.
Some lenders now allow for the borrower to actually document their income with a simple verification of employment from the employer, thus doing away with the need to document W2s, tax returns, and paystubs.
Almost any type of loan today has a stated income feature if needed.
Stated income loans are available for self employed as well as W-2 employees, however many lenders will offer a slightly higher rate for W-2 employees because their income is usually easier to document.
A Stated Income Loan requires less paperwork than normal for approval. The income is stated on the application. Tax returns, w-2 forms, and pay stubs are not required. The stated income should be reasonable for your occupation
Under "No Income Verification" loan programs, also sometimes called "Stated Income" or "No Income/No Asset" programs the applicant's income is not verified by any of these methods. The applicant is qualified from the income stated on his/her loan application.
These programs were initially created for borrowers who are self-employed and may not be able to verify all income from traditional sources such as tax returns.
These types of loan programs allow a credit worthy borrower to access financing through no traditional documentation. There are a variety of programs available. Some programs even allow a borrower to finance 100% of the property value for a refinance or a purchase.
Most lenders also charge a higher rate on a stated income loan.
Stated income loans are very popular with business owners. Since they write-off a lot of their expenses at the end of the year on their taxes they sometimes have very little net-income to qualify for a full-doc loan.
Tailored perfect for business owners and commission based sales people.
Stated income loans are used when a borrower cannot provide income documentation such as paystubs and tax return information. In a stated income loan, the client "states" the amount of income that they make and the position and for how long they have worked. Lenders usually require the borrower be employed for a minimum of 2 years for stated income loans. Also, when you state the income, it must be typical for that job title. You can't have a Mc'Ds cashier making $8,000 a month. The stated income must be believable.
Generally a no income, no asset (NINA) loan requires no verification of income or assets. However verification of employment is required and 2 years of same line of work is required. A No Doc loan is a NINA without verification of employment.
Some banks offer borrowers with high credit scores stated income loan programs with no adjustments, meaning the borrowers would not get "surcharged" or penalized for not furnishing proofs of income. These stated income programs offer interest rates that are identical to that of full documentation loans.
Stated Income programs are ideal for those clients with non-documentable income sources. Typically for those who may receive portions of income in cash.
A stated income loan normally requires a slightly higher FICO score to qualify for the same loan to value as compared to a full documentation loan or bank statement program.
If you adhere to certain loan to value restrictions, you may be able to state your income and get the same rate as full documentation when refinancing your home.
Stated income loans are mainly for self-employed and commissioned borrowers. Stated, no doc, and no ratio loans can also be used for tipped employees too. Waiters, waitresses, hair dressers, for example, are all common professions that stated, no doc and no ratio income loans can benefit. With stated loans you state the income you truly make. With a no ratio loan you fill in your employment information except no income is documented and no debt ratio is calculated. Lastly with a no documentation loan, you do not state your employment information or your income, and no debt ratio is calculated. Some of these programs may require you to have a certain amount of money put away somewhere, known as reserves. A high credit score is generally needed for these types of programs, and the less documentation that is required, will usually result in a bigger rate bump for utilizing one of these programs.
There are two common types of Stated Income Programs:
Stated Income Verified Assets Loan: (SIVA) - Loan approval is based on your stated income, credit history, and verified liquid assets (bank accounts, 401k, stocks, bonds, etc.). The Verified Assets should be consistent with the income claimed.
Stated Income Stated Assets Loan (SISA) - This loan has no assets being verified. You only state your income and state your assets on the application. This program may have a slightly higher interest rate because the assets are not verified.
Some variations of stated income include:
1) Reduced Doc - Income and assets are disclosed on the application but income is not verified. Assets are verified.
2) No Ratio - Income is not disclosed on the application and assets are stated and verified.
3) No Income No Asset - Income and assets are not disclosed on the application and are not verified. Employment not stated or verified.
Lenders will look at the "stated" income to verify it is justifiable. You cannot state $80,000 worth of income working part-time as a cashier. This has to be an accurate figure of income actually made.
Stated-income mortgages are for people who make the money they say they make, but that amount doesn't show up on the bottom line of their income taxes.
Stated Income loans still must be approved by an underwriter. The stated income must make sense for the employment that the borrower has.
Under stated income programs your income will not be verified but your employment will. No employment verification programs are typically called No Documentation or NINA (No Income, No Asset).
A very common question Lenders ask following a stated-doc scenario, is "W-2 or self employed?"
Whether you are self-employed or a W-2 employee, the Stated Income Loan can help to reduce the documentation you have to provide in order to qualify for your mortgage. With your good credit, the underwriter will essentially take your word about your income level, without requiring verification of that information.
The Stated Income Loan does not require you to provide your pay stubs, W2s, 1099s, tax returns, and other documentation required to verify your income level. This can make your application process easier and, since there are fewer questions to answer, more likely to go smoothly.
Some Stated/Verified and Stated/Stated loans for A paper lenders do not require a hit in pricing if under 80% Loan to Value. Without a hit on pricing, these loans are extremely helpful for getting the loan done quickly, as it requires less paperwork for the lender to review.
It is crucial that you counsel with a competent Mortgage Broker or Mortgage Planner before entering into a Stated Income program. It is their job to thoroughly investigate all of your options, income sources and figure corresponding ratios in order to recommend the best product. A good mortgage planner has the heart of a teacher, not a salesmen, and plays the role of a trusted advisor.
Please don't make the mistake of withholding information or providing inaccurate information that they may need to properly qualify you for a stated income loan. You may be tempted to fudge the numbers a little in order to qualify for that dream home, but this could spell disaster as you may be able to qualify for more home than you can afford.
You may be required to sign a 4506-T that will allow the lender to pull your tax returns if needed. Not all lenders will require this form and your lender will know if it will or will not be.
Stated Income Loans have been the target of recent scrutiny in the mortgage industry. For example, in the State of Massachusetts more than a half a dozen mortgage broker business have been closed due to fraudulent activity in regards to stated income loans. It is important to state income true and accurately, and not inflate monthly income to reach the desired and necessary Debt to Income (DTI) Ratio for a particular loan.
You are responsible for providing an accurate figure when the loan officer asks 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 under the law.
They say you can beat the tax man or you can beat the bank, but you can't beat them both. If your income is difficult to document because of commission based pay or revenue from self employment, stated income loan programs are available which enable borrowers with sufficiently high credit ratings to borrow money at competitive rates. Programs are often available to borrow money equaling up to 100% of the value of your home, without the need to verify your income or your assets, or in some cases without the need to verify either.
Stated Income Loans are for borrowers with income sources that are not easily verified through normal channels. So, lenders allow borrowers to state their true income without verifying it. These loan programs are usually for borrowers with good credit and come with a higher interest rate.
Many self employed borrowers take advantage of stated income loans so they do not have to provide tax returns to qualify.
As you move down the line on the different programs, from SIVA to SISA to NINA the interest rate will move a bit higher each time. Depending on your credit scores and LTV (loan to value) you might be able to qualify for one but not another.
Stated income is a very popular form of loan qualifying. As you're probably aware, most successful business owners write off a lot of their expenses at the end of the year on their taxes, causing very little net income to be used for qualifying for a loan. You also see this with borrowers that make tips, bonuses and commission as their sole form of income.
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Information listed above is to be used for educational purposes only and is not guaranteed