A stated income mortgage is for borrowers who can't prove their income with standard income documentation, usaully these borrowers are self-employed or work for tips or have a commission based salary. A stated income mortgage is a good option if you would have difficulty proving your income. The income that you state on the mortgage application must be reasonable in terms of your occupation and assets.This means that if you are a waitress and you say you make $10,000 a month it may raise some eyebrows in underwriting. Stated Income Loans are available with credit scores as low as 580 so perfect credit is not always required.
Stated income loans can be used to purchase a new , to borrow against equity or refinance an existing mortgage. Stated income loans are offered as fixed rate mortgages, adjustable rate mortgages, or on negative amortization mortgages. A stated income mortgage does requires a higher credit score to qualify for the same loan to value amount as a full documentation mortgage or bank statement mortgage program. Stated income loans are available for self employed as well as W-2 employees, although mortgage lenders will raise the loan rate for W-2 employees because their income can be verified through the IRS. Lenders normally require 2 years employment in the same line of work for W-2 stated income mortgage borrowers.
Stated loans are useful tools for self employed people to buy and refinance homes but the mortgage industry is pulling back on them because of the rampant fraud in the industry and high foreclosure rate.Lenders are increasingly playing the odds, knowing that very few real estate loans end in foreclosure anyway, and most of the risk is transferred to investor groups who purchase the loans in bundled groups. Although currently, with the increasing number of foreclosures in America, it is almost impossible for first time home buyers to get approved for their first time home purchase using a stated mortgage and no money down.
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