Stated Income Loans

Property loans like real estate loans and home loans usually require the borrower to provide detailed information about their income. The income of the borrower is what helps the borrower of a property loan qualify for the loan. However, there are certain types of real estate loans that do not require the borrower to prove their income. Instead, the borrower simply states how much income they are making, without any documentation. These types of real estate loans are called stated income loans. Stated income loans are usually loans used by people who cannot prove their income, like people who are self employed.

People who are self employed have to file their taxes differently than people who have traditional employment. Taxes for the self employed make it appear that the self employed makes less than what they really are making. This primarily deals with how many tax deductible items that a self employed person will use on their taxes. Stated income loans do not look at income taxes because of how low of an income that a self employed individual may appear on the loan, regardless of how much money the borrower makes. Instead, stated income loans simply take the word of the borrower.

There are documents that a stated income loan requires, which primarily deal with a credit check and verification. Even though stated income loans do not go over income tax or documentation that proves someone’s income, other documentation will be needed in order to qualify for this type of loan. Someone who is self employed may still need to provide proof of past employment as well. Having an excellent credit history has a great deal to do with qualifying for a stated in come loan. If the borrower has poor credit, chances are they will not be able to qualify.

Some borrowers who may be more questionable on the stated income loan than others will need to provide additional documents like a letter from their accountant. However, this isn’t always the case as borrowers who use this type of real estate loan typically have an excellent credit score that lenders approve. Because full documentation isn’t associated with a stated income loan, the lender may view the loan riskier than other traditional real estate loans. Lenders will charge a higher interest rate on this type of loan in order to reduce the amount of risk the borrower may impose on the lender.

Because these loans don’t require the usual documents that other typical loans do, there are higher chances of fraud that lenders will experience from a stated income loan. Borrowers will be tempted to lie about their income when they realize this type of loan doesn’t require proof of their income. However, getting caught lying about how much income is being made will cause the borrower to deal with charges of fraud. These types of loans should be used for the self employed who have no way of actually proving their precise income on paper.

There are plenty of lenders online that the self employed can shop with in order to find the best rates possible on a stated income loan. Filling out an application only takes a few minutes online, and any additional documentation needed will be requested by the agent dealing with the application. Shopping online for this type of a loan is a good idea because the borrower will have more of a chance saving on interest. The amount of competition online between these lenders helps to reduce interest rates on these loans. However, borrowers will expect to pay more interest for a stated income loan than a traditional real estate loan because of the lack of proof associated with this type of loan.