Borrowers with good financial situations and who make all their payments on time are usually regarded as low risk borrowers and will be in good standing with their lender. This type of borrower can take out a mortgage loan without having to provide too much documentation regarding their income. Usually, the lender will trust that what the borrower declares as income is true and make a loan offer. Stated income loans are designed for those who have enough money and income to afford a mortgage, but don’t meet the conventional underwriting standards.
Normally, in order to get a mortgage loan, the borrower has to provide full documentation, which includes income proof for the previous 2 years, usually done by presenting a W-2 form or tax returns. Self-employed mortgage borrowers and people with full time jobs who have just received a large pay increase usually aren’t able to come up with these documents, but they can afford the mortgage.
Can Someone Simply Lie About Their Income?
Some lenders choose not to check the income of some borrowers, but this usually only happens for borrowers who have very good financial situations and a good relationship with the lender. Some lenders ask borrowers to allow them, by executing a Form 4506, to check their tax returns for the last 2 years through the Internal Revenue Service. Lenders don’t normally go as far as actually checking tax returns, but the fact that they can at any time should persuade the borrowers to report their income truthfully.
Even if they don’t check a borrower’s actual income, all lenders check the source of the income. They also require self-employed borrowers, as well as borrowers who work full time jobs, to be in the same business or be employees in the same field for at least two years before applying for a stated income/stated asset loan. The borrower’s income must also be close to incomes earned in the same line of work as he or she is involved in.
Things to Remember Before Considering a Stated Income/Stated Asset Loan
Stated income/stated asset loans are not for everyone, and there are a few things that you need to take into consideration before you decide to take out this type of loan. First of all, not all stated income loans are the same and have the same requirements. Requirements for this type of loan vary from lender to lender, and you might not qualify for all the offers. Second, stated income loans may cost you more than a traditional loan because they are riskier for lenders.
Another thing that you need to keep in mind is that, while stated income/stated asset loans take a shorter while to be processed, this shouldn’t be the only reason why you should choose this type of loan. Even if a conventional mortgage loan takes longer to process, it might be a better and even cheaper choice.
Stated income/stated asset loans may be a great choice for some borrowers, especially if they don’t meet the requirements for full documentation for conventional mortgage loans, but are able to easily afford a mortgage loan. All borrowers who consider taking out a stated income/stated asset loan, should first do a little research to make sure that this type of loan is their best choice, and check out other options, which may actually prove to be more beneficial.