All loans have restrictions, but stated income loans have a much larger number than any other program. This is largely in part due to the fact that the housing crisis was almost singlehandedly caused by the number of stated income mortgages that were given out without blinking an eye. Lenders were giving loans to people that said they made enough without verifying it in any other way. The good news is that the program is back, but the bad news is that there is still a lot of verifying that must be done in order to qualify for the program.
You Have to Have Income
The first restriction makes sense – you have to have income to get a loan. Where this program falls into place is for those people that have a good income, but cannot prove it. People that work on commission, those that have low salaries but large bonuses throughout the year and the self-employed are great examples. People in each of these groups might make a great living, but if they cannot prove their steady income, they are not welcome to a loan in the conventional sense. With stated income loans, they can “state” their income, yet prove it in other ways. The most typical way is to prove it with bank statements. There is no better way to prove the cash flow that comes in and out of a person’s life than with their bank account. So if you have that option, at the very least, you can verify your income and get approved.
You Have to Have Money
Having an income is not enough when you are stating your income and not properly verifying it to the fullest degree. You have to have plenty of saved money to back you up or back the lender up, whatever the case may be. You have to have the money in order to put it down on the home to purchase it. Typically, lenders want you to put down at least 30 percent, but sometimes more depending on your situation, such as your credit score and the price of the home. You also need money in the bank – at least 12 months’ worth of reserves is the minimum for most lenders. This gives the lender relief knowing that you can pay the loan even if your unusual source of income were to falter at some point down the road.
You Have to Have Good Credit
Stating your income is like telling a story – you might be telling the truth and you might not be. In this case, it can be verified for the most part, but you might embellish if it is possible. Because of the risk level involved in that, most lenders require excellent credit, if not at least good credit. Typically, a minimum score is 700, although a few lenders have been known to accept slightly lower scores. The lender will look not only at your score, but at the history too. If you have late housing payments in the last few years; plenty of collections; or random late payments on installment or revolving loans, you will have a harder time obtaining a stated income loan. Your credit report tells a story about your financial responsibility. If you can prove that you are response with a high score and a great history, then you have a better chance at this type of loan.
Overall, you need to be an attractive borrower for banks to want to give you stated income loans. They are not just handing them out like they used to – you have to prove your worthiness in the form of good credit, plenty of assets, and the ability to put down a large down payment. If you don’t have all of these factors, it might be harder to get the loan. Taking the time to prepare to get to that point can help better your situation and enable you to become a homeowner despite your odd method of receiving income.