It’s time to gets some new facts out there regarding stated income loans. Yes they exist! (good start huh!)
I’ve been getting a lot of calls lately from both Realtors and home buyers who just don’t know what they can and can’t qualify for without documenting their income. Some who have all but given up and I am happy to tell them how to get approved, and some who are just getting started and didn’t realize that good credit alone will not always alleviate income documentation. I figured now was as good a time as any to review some of the new rules of income documentation.
In today’s market there are 2 types of loans that do not require income verification. Believe it or not, some have great interest rates.
One is a borrower who is so well qualified that they receive what’s called an income waiver on their underwriting findings. An income waiver allows the convenience of not providing the income (and in many cases the asset) documentation. A mortgage professional should be able to estimate the likelihood of receiving one with a preliminary review of the application, and should be able to get a final answer on the same day that the application is taken. There is no exact science as to what will generate this extra convenience, but keep in mind, if anything on an application like this changes (smaller down payment for example), the waiver could disappear. Rates for these types of loans are NOT any higher than normal loans, and are actually quite low.
The other is by meeting guidelines for one of the few lenders who are still offering a stated income loan. The most aggressive of which seems to have 2 main hurdles to get past; 1) the borrower must either be self employed, or be heavily commissioned, and 2) there will need to be a substantial down payment (think 25% down) and credit scores that are not lower than 680, and sometimes need to be higher. The good news is that these loans absolutely DO EXIST. Rates for these types of loans WILL be higher than normal.
One last thing; The majority of people applying for stated income purchase loans are self employed and have been filing their taxes in such way that they think they “write off too much to get approved.” I can tell you that there are some very aggressive ways to get those write off’s added back into the income calculations. The ways of doing it have gotten lost because of the previous ease of not needing to provide the tax return. I am happy to review a tax return for any of you who are unsure about a client’s income. Have them email or fax it to me and I will let them know within 1 business day how it looks.
--Keith
**If you know someone else who would benefit from these updates, please pass this link on to them http://www.realestatemortgagenews.com
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