- 1). Stated Income Loans are used primarily by self-employed borrowers to qualify for a loan. The most common type of loan to offer stated income approvals are mortgages. Self-employed people usually have trouble verifying their monthly income. For example, a contractor may only receive large payments for work several times a year, but will be unable to show a stable monthly income. Workers that make a large number of tips may not wish to claim all their income due to tax reasons. To address the demand for flexible loans, lenders have designed a different set of guidelines for approval. Stated income programs are now very common, and will become more mainstream in the future as the jobs and the economy become less reliable. During the subprime mortgage boom, many stated income programs came out. The majority of these programs were referred to as "liar loans," and gained a bad reputation with banks and lenders due to high foreclosure rates.
In order to slow the tide of foreclosures, lenders have restricted the stated income programs. - 2). The approval process for a stated income loan is now much stricter, but there are many options still available to the stated income borrower. The new guidelines focus on several factors: credit, assets, and collateral.
Credit is the credit score of a borrower, the accumulation of a persons credit history. Lenders scrutinize this closely. Assets are the sum of a borrowers bank accounts, 401k accounts, IRAs, and other tangible and liquid accounts. If you require a stated income loan, be ready to show your assets. Collateral is the value of the home, auto, or object that the bank will lend against. - 3). In order to get a stated income loan, you must state the income amount you make per month on the loan application. This amount does not need to be proven; however, you must be sure to claim enough income to keep a low debt ratio. For a useful income calculator, click here.
Stated income loans can be acquired by a borrower that fits the guidelines of a stated income lender.
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