Stated income loans in the past were a preferred financing option. However, they faced significant challenges and eventually went out of the market. But now, stated income loans have come back into the marketplace.
Unfortunately, many people have blamed the financial crisis faced by the lending institutions and their lack of concern to document the ability of a borrower to repay a loan.
In the current scenario, the stated income loans can be availed for investment properties partially as this loan does not come under the same amount of regulations as the owner-occupied residential loans.
What is a stated income loan?
It is an excellent alternative to traditional loans wherein there is less paperwork and time required to get the amount sanctioned. In addition, it is a speedy and convenient process of acquiring fundings as the stated income application doesn’t require any written income verification like tax returns. However, search applications aren’t available to all.
The borrowers who get this benefit are refinancing their property with a good amount of equity or are buying a home with a solid down payment. The lenders accept such applications because of the high credit score and equity required for the typical application process.
Stated income loans can be highly beneficial for self-employed people as they make the loan process more accessible. However, despite this, there is a lot of misinformation and talks about the stated income loans. Remember, there are different types of applications, and it is vital to understand the possibilities to know what you are getting.
If you have decided to take a stated income loan, then here are some facts you need to know before filling up the application form.
Things to Know About Stated Income Loan
• Not all stated income loan applications are similar
The stated income is generally interchanged with a similar expression, no doc loan. This means there are different varieties of loan application formats that have other requirements. Thus, it is vital that you understand everything well and then decide the best course of action for your condition.
• Application criteria
The stated income loans were originally meant for the self-employed people who have less actual business expenses and don’t claim about the gross earnings than the report on the tax returns. However, now some stated income programs allow the employed people to acquire the financing.
• Stated income loans can cost more
Generally, people have a misconception that by taking state income loans, they can save money. You must know the stated income loan is reserved for those with a solid down payment, credit, and significant equity, but none of the factors can change the fact that stated income loans can be risky to finance. They are a much richer option for a lender than any other type of loan available.
• Stated income claims can be checked
While there is no guarantee that the stated income loan is checked, there’s still a possibility. Do not think it is an opportunity for you to claim an income of $500k a year when you don’t.
Being honest in the application process can help you greatly in the long run. If the documents are verified and the lender finds you have lied, he can deny the loan at the last moment.
• Determining qualifying income
In some instances, bank statements offer a good alternative for business owners who cannot provide the tax returns and want to avoid the risk of mentioning income on the application, which an IRS transcript can verify.
The lender will review and check the past 12 months of the bank statement to determine the applicant’s income. Then, he will calculate the gross deposits and the expense percentage to see if the applicant can get the loan.
• You require property tax records
A lender will not apply to someone who has failed to file tax returns or claim income they do not make. This happens because the loan is secured by keeping a property on the mortgage.
So in case, the property is sold in the mortgage lender will have the first hand over the property. This means one needs to pay the entire first loan amount before the second one.
• Stated income loan can help save time- but is it beneficial?
Stated income loan is known for faster processing of finances. It is unlikely that a seller will wait to agree for the next week. The borrower wants to have adequate time to pack, move and sell the current residence. The seller, too, wants the same. Thus, faster processing may not always be advantageous.
Stated income loan- Is it right for you?
The stated income loan presents an excellent opportunity for investors as they only need to showcase their ability to repay the loan. As the state income loans are funded privately, the lender can alter the required documents and other criteria for the approval of finances.
Traditional mortgage loans are not the right choice for everyone, especially for self-employed people or someone who wants to invest in a property that produces profit. In addition, a person with fluctuating income will be asked to show his financial standing as proof of income.
The documents for a traditional loan might require tax information and other documents. If the situation sounds similar to you, then a stated income loan might be the best choice for you.
When compared to the conventional loan, a stable income loan is more accessible and convenient in terms of the verification process. However, it does not mean the lender will not investigate before approving the loan.
Each application has its requirement, but everything is based entirely on the income and ability of the borrower to repay the loan along with the debt-to-income ratio. These loans typically require a borrower to pay a significant down payment and sometimes have a higher interest rate. There is a bit more risk associated with such loans.
Stated income loans have successfully made a comeback. They are now serving as the best alternative options. The demand is due to the benefits and ease of getting the loan approved.
However, one must never take the loan approval process lightly. When the lender decides to check the documentation, then there is a risk you can get exposed.
Thus, it will be better to share only the most relevant and actual data about your income on the documents. Besides this, it is essential to take help only from a reputable and trustworthy lender who offers you great benefits and helps safeguard your rights.
If you are looking for a lender who can assist you, then Private Capital Investors is the best. They have a team of professionals who will bring forward the best deals and offers for your requirement.
With their help, you will get adequate finances for your need in a short time. No matter the challenges or hardships you face in acquiring a loan, the company will help you achieve the best.
So if you wish to get the finances in a short time with no hassle, do not hesitate to contact the company for help and assistance.