Stated income loans are slowly making their comeback in the mortgage market, usually through the smaller more non-traditional lenders. These lenders are the primary holder of these loans and can create their own guidelines to the mortgage loan options they offer. While still upholding the “ability-to-repay” rule so they cannot issue a loan a borrower can’t actually afford. Other than that, these lenders can offer whatever they choose and without restrictions on what they charge. What does this mean your interest rates on stated income loans? Well, it means the interest rates will most likely be higher.
Why You’re a Risk to Lenders
Usually, when a lender requires an interest rate that seems high is because you pose some kind of risk to them and to the bank. This means that someone who qualifies for a conventional loan will most likely have a lower rate than someone who is getting a stated income loan. This is usually due to credit and income verification. If someone who is qualified for a conventional loan has a lower interest rate it’s usually because they have outstanding credit and can prove their income via pay stubs or W2s.
Someone who is trying to get a stated income loan and is self-employed or has a job that relies mostly on commissions or bonuses and don’t have a steady monthly income, their pay stubs may show very little income. This doesn’t put a halt to their dreams of owning a home, just means they will be required to pay a higher interest rate to prove to the lender they can not only afford the loan, but that they intend to pay it and keep the loan current. Since the problem with stated income loans are verification, this makes these loans much riskier for lenders and in order to continue to offer them the lender needs to compensate for the risk, therefore charges a higher interest rate.
How to Lower Your Interest Rates
There is good news to this interest rate debacle, if you have certain compensating factors that make you seem like more of a strong borrower then the different in the interest rate from a conventional loan might not be as severe. For example, if you have impeccable credit, a big down payment or steady employment that you can easily verify (even if you can’t verify the income) you can make up for the risk. Lenders like to see strong borrowers so anything you can do to make yourself more financially stable and responsible, the better off you’ll be and the lower your rate will get.
To conclude, yes, your interest rates may be significantly higher when it comes to stated income loans, but that doesn’t mean they aren’t affordable. There are many lenders that offer stated income loans and each lender will offer different guidelines and rates so be sure to shop around different lenders in order to the right lender for you.
Ready to get started? Click the link below and within minutes you’ll be matched with a lender eager to help you with your stated income loan. It’s quick and easy and only takes a few minutes to get started. Don’t wait, turn your dream of home ownership into a reality.
