Archive for the ‘Mortgages’ Category

The Way Stated Income Loans Work

Simply speaking, the stated income loan requirements will not ask for any document that will serve as evidence of the income indicated in the application form.  Now, to define the stated loan, they are those lending instruments that will help a person who needs to fund a mortgage.  Due to the current mortgage rates in the market, some people will opt to get the debt instead of applying directly to the financial institution for the loan.  This way they avoid those long processing and documentation requirements they cannot meet.  Of these needed prerequisites, the income will be the one that will be

The stated loans will allow the potential borrower to give an estimate of the monthly gross income.  In addition, some lenders will ask from the borrower a list of assets they hold in case the loan will get into a default.  As part of the agreement for the application, the lender will promise not to ask from you any document that will evidence your income. However, there are some institutions out there who will do some information verification by calling the employer to check of you do work there.  On other times, they may request a letter from your accountant stating the business profits.  This is important for many lenders as the job title will be the determinant factor whether the income stated will be in the range for that industry.

There are rare cases when the over estimation for the debt has been discovered.  Once the lender has learned that you have stated profits that are way beyond your earning capacity, the debt application will be denied.  In addition, there are institutions that will be asking the borrower to fill up an IRS 4506 Form.  This will act as an authority to the lender to conduct some investigations to the tax returns of the business or the person applying for the loan.  The history for the returns requested will be usually around two years or more.

In addition, the stated loan will have a higher interest rate compared to the other loan types in the market.  Plus, it has been noted that these lenders will ask from the borrower a larger down payment as a sign of goodwill.  Credit scores and ratings will also become a factor in the debt application.  The higher the score of the applicant based on the payment history of other loans will mean a higher chance that his application will get approved.