What is a stated income mortgage?
Many homebuyers need a mortgage that allows them to verify their income using non-traditional documents. A stated income loan fills this need.
What is a stated income mortgage?
A stated income loan is a mortgage in which the lender verifies your income using non-traditional documents.
This type of loan is for people who want or need to qualify for a mortgage without relying on the standard documentation usually required by mortgage lenders. This usually includes your most recent pay stubs as well as income tax returns and W2s for the past two years.
People who could benefit from a stated income mortgage include:
- Someone with sporadic or seasonal income
- Someone who pools resources with family members
- Self-employed with low taxable income
- Profitable business owner for less than two years
- Employee who recently obtained a raise
Any of these types of borrowers can be fully creditworthy. They may simply not have the type of income documents required for a standard mortgage.
Can You Still Get a Stated Income Mortgage?
Stated income loans are available from many mortgage lenders today.
The reason some people think the listed loan is a thing of the past is because it developed a bad reputation after the 2008 real estate crash and resulting recession.
The bad reputation was well deserved. Declared income mortgages often took the form of a stated income, declared asset loan (SISA). Lenders did not verify information, often had lax requirements, and allowed very high loan-to-value ratios (LTVs) – up to 125% of the appraised value of the home. Basically anyone could get one.
Home prices have risen rapidly, fueled by the frenzy of liberal lending and buying. Then the real estate bubble burst.
Today, reported income programs require a credit score of at least 660. Most allow an LTV of no more than 80%, but a few allow 90%.
How to qualify for a stated income loan
The eligibility requirements will depend on the type of loan most appropriate for your situation and the stated income program for which you are applying. Here are the general requirements:
- For an alt-doc loan program, you will provide profit and loss statements and at least one recent bank statement.
- For a bank statement loan program, you will provide 12 to 24 months of bank statements. This type of loan is sometimes referred to as a stated income, verified asset loan (SIVA).
- For each type of loan, if you are self-employed, you will need to prove that you have been in business for at least two years.
When is a stated income mortgage a good option?
A stated income home loan is a good option if you cannot qualify for a traditional mortgage or are not interested in a traditional mortgage, but you can show your income using verification documents. non-traditional income.
If you’re a small business owner or wondering how to get a mortgage when you’re self-employed, you might qualify for a stated income mortgage. It can be more difficult to apply for a standard mortgage because the documentation requirements are more onerous for people who are not salaried employees.
If you go this route, you will notice that stated income loans cost more than standard mortgages. The lowest mortgage interest rate available for stated income loans is typically about two percentage points higher than typical mortgage rates.
To help you determine what’s right for you, use a mortgage calculator to estimate the payment you can afford, and use a higher interest rate if you think you’re going to apply for a specified loan.