Stated income mortgage is a type of loan that is designed for individuals seeking a mortgage loan without the need of a verified income. Basically, when applying for a stated income mortgage loan you will state your income and this information does not need to be verified. In other types of loans, it is common for the lender to verify the income with the borrower’s employer. Not requiring verification of your stated income can be very convenient, especially if you are self-employed.
How the Stated Income Mortgage Loan Works
The stated income mortgage loan allows you to state your income without the need of verification through your employer. This feature is available but will come at a slightly higher cost for interest rates. You can expect at least a one percent increase in interest rates for stated income mortgage loans when compared to typical mortgage loans. The increase in interest for stated income mortgage loans should be factored in when deciding on what type of mortgage loan to apply for.
The stated income mortgage loan provides borrowers with a type of loan that allows them to apply without risking their chances of approval. There are many borrowers that do not have their full income claimed on their tax forms. If an individual has significant tax deductions then their W-2 income may be very low. A stated income mortgage loan allows this individual to claim their full income amount so they will be more likely to be approved for the loan. This also allows the individual to be more qualified for higher lending amounts.
Who Can Benefit From a Stated Income Mortgage
There are many circumstances where applying for a stated income mortgage loan may be a good idea. If you are self-employed then this would be one major example. If you are mainly paid in cash for your work then a stated income mortgage may be a good idea. For example, if you are a professional poker player then verifying your income may not be incredibly easy to do. There are too many variables that are involved so being able to state your income without verification is very convenient.
Small business owners can benefit tremendously from stated income mortgage loans. The reason for this is that your income may be a lot higher than it is shown on your tax papers. Tax write offs and similar tax benefits may not be factored into your financials so verifying your full income may not be possible. Also, if you are frequently tipped for your work then a stated income mortgage may be a good idea. There are many situations where you cannot completely verify your income and applying for a stated income mortgage loan may be your best chance for approval.
Basically, if you do not claim your full income in your tax forms then you may need to go the stated income mortgage loan route. This may or may not be intentional. Many workers are tipped or paid in cash and they do not always claim the full amount they make. Business owners with tax benefits may not also be able to display their full income on their taxes. This means that the lender may not be willing to approve you or lend as much as you are hoping for. In these cases, the stated income mortgage loan option is a great choice for a type of mortgage loan to apply for.
How to be Approved for a Stated Income Mortgage Loan
If you would like to be approved for a stated income mortgage loan then you will need to be qualified for this type of loan. The main qualification for a stated income mortgage loan is a decent credit score. Ideally, you will have a credit score of 630 or more if you are applying for this type of loan. If your credit rating is not this high then you may want to work on getting it up before applying for a stated income mortgage loan.
If you have filed for bankruptcy or made any foreclosures then you should make sure at least three years passes and your credit status has been properly established before applying for this type of mortgage loan. Lastly, to qualify for a stated income mortgage you are usually required to make a down payment of at least 5% of the value of the property that the mortgage loan is being acquired for.