Stated income loans used to be widely available before the housing market crash of 2008. When the Dodd-Frank Act was created in 2010, it heavily regulated banks and lenders. However, these loans that require no income docs or no tax returns for contractors and self-employed borrowers are available with more lenders. Stated income loans are for non-occupying investors looking for short term financing on an investment property they plan to flip, or use for rental income. It is now illegal for any consumer to get a stated income mortgage for an owner-occupant property. These loans are very similar to a hard money loan, but are considered to be a step up because they have lower rates and fees. There are several pros and cons of these type of investment loans.
Stated Income Loan Advantages
- Very little documentation is needed
- Tax returns not required
- No income verification
- Quick loan process
- Get up to 70% LTV (loan-to-value) of the property
- Many have no pre-payment penalties
Stated Income Loan Disadvantages
- High mortgage rates
- Large downpayment requirements (30%+)
- Cannot get a loan for more than 70% of the purchase price
- Closing costs are higher than traditional mortgages
Stated Loan Requirements
Lenders that offer stated income mortgages have higher requirements than a typical conventional mortgage loan. Because of this, you will need to have a good credit score, large amount of reserves and a large downpayment because of the increased risk for the lender. The better your financial and credit situation is, the more likely you are to be approved and get favorable rates.
- Large amount in savings
- High credit score requirement (700+)
- Bank statements are needed
- High level of income
In what situations would someone need a stated income loan
- Flipping a property but need a loan to help finance it
- Investors who have large amounts of cash coming in a few months
- Used to lessen the capital needed to buy and flip a property
Finding stated income mortgage lenders
Finding these lenders can be fairly easy with a google search. Remember they have very high qualifying standards because it is a very risky loan. You will need to have great credit, high downpayment and high income to get approved. Remember that stated income loans will have high interest rates and lender fees. However, these loans are still much less expensive than other investment loans, like hard money loans. If you do qualify for a stated income loan you should shop multiple lenders to ensure you’re getting the best possible deal.
The Lenders Network has the largest network of mortgage lenders that specialize in home loans for borrowers with all types of credit scores. We will match you will the best lender based on your specific situation.