Stated Income Loans
Author: Ryann Cairns
The first thing most lenders look for when evaluating an application for a mortgage loan is the credit worthiness of the applicant. The applicant’s income is examined carefully to make sure that they will be able to make their monthly payments on a consistent basis.
Most applicants for a mortgage have a full-time job, complete with pay stubs and tax returns to verify the amount of income for the past two years. However, there are those borrowers who do not work at a traditional job and have no third party pay stubs to back up their income. These applicants include the self employed, consultants, independent contractors, business owners and others in special circumstances.
Many people have multiple streams of income. For instance, they may work as a consultant and receive income on an irregular schedule. Or they may run a small business whose income is seasonal in nature. These types of borrowers will typically need to take out a loan on their stated income. The verification process for these stated income loans will vary from lender to lender.
Some lenders will want to see two years worth of bank statements to verify that they show deposits equal to the amount of income stated by the borrower. The lender will need to be sure of the borrower’s ability to make the monthly mortgage payments. The borrowers credit score and credit history will also be important with a stated income loan. If the borrower can show a consistent history of on time payments, the lender may be more willing to give the borrower the loan he or she seeks.
There is no doubt that getting a loan on stated income is more complicated that just providing the past two years tax returns. But if the borrower can adequately prove their income, a stated income loan is a great way to go.