Stated income mortgage loans were the hot topic of controversy that eventually greatly contributed to the 2008 housing market bubble. Many Americans could simply request a loan based on nothing but the sheer amount of numbers on paper that they declared as their income without any solid proof to back up those numbers.
As you probably guess that led to many of them default on their loan and after deposing the 2010 Dodd-Frank Act stated income loans are now more regulated. Lenders are obliged to fully document a borrower’s ability to return the loan either with income or assets.
Still, today and even back then anyone employed who could provide enough of the required documentation and fair credit score could effectively require a stated income loan and get hold of the cash in a matter of days. But, how about all of the self-employed hard working people who also have unexpected expenses and who are most of the time in a greater need for such loans?
In the following lines, we will provide you with a brief guide on what it takes for self-employed people to obtain a stated income loan and why self-employed workers are sometimes even better clients for such an opportunity.
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Stated Income Loans for Self-Employed People
The rules and regulations for self-employed people who require a stated income loan have loosened up greatly recently. For instance, most of the leading stated income mortgage lenders only need one year of income tax documents to verify your income, if your request matches automated underwriting.
Plus, lenders are practicing a new income scheming for self-employed business owners with little or no history of distributions.
The new loan regulations are also more favorable toward self-employed people who work a second job on the side, however, workers with self-employed side gigs are not always required to declare this income if they qualify using only their primary job.
Rules in 2020 for Self-Employed people requesting Stated Income Loans
In 2020, self-employed workers are able to arrange stated income loans by providing their bank statements as evidence of income instead of satisfying tax returns. This makes stated income loans for millions of self-employed Americans a great opportunity.
Self-employed workers often have a problem in that they comprehend all of the legal tax deductions, but then when it comes to applying for a mortgage they are showing a much lower net income. This happens since the net income after expenses are what makes it very hard to fit conventional mortgage regulations.
The essential factors of today’s stated income loan arrangements are for the borrowers to notice a constant flow of money coming into your bank accounts.
They will generally use the last 12-24 months’ bank statements to get an average monthly flow. A percentage of the average deposits is what it’s going to be used as an example of your “income” in this process.’
Stated Income Loan Benefits
- Boosts self-employed borrowers to qualify for fast cash approval
- No requirement to qualify based on your tax returns
- Many Low down payment possibilities available
- Stated income mortgage charges are insignificantly higher than conventional mortgage rates
Stated Income Loan Requirements
- You must be self-employed for at least two years.
- A minimum of 600 points credit score and a 10% down payment needed for a mortgage.n>
- A requirement of 2 months bank statement and for other borrowers sometimes 12-24 months.
- Some lenders may also require your tax returns however, they will still accept your bank statements to qualify you.
- In case of foreclosure or bankruptcy, some borrowers may expect a higher down payment.
Stated Income Loans Are Making a Loud Return
After being withdrawn for several years following the before mentioned house market crash, stated income loans are making a slow but loud comeback all over the USA. However, today’s “no documentation mortgage” opposes from the dangerous loan plans that subsisted the pre-subprime mortgage disaster.
As you might hear in the past, genuine stated income loan is only accessible for non-occupying investors looking for short-term investment on properties. These loans are very similar to hard money loans except that the lender, in this case, uses your monthly income cash flow to declare whether the loan will be approved or not.
For all other stated income programs, you will need to prove your previously mentioned income.
However, you are not required to do so through tax returns. As explained above, “income” can also be determined via bank statements or liquid assets.
This makes it probable to qualify for a stated income loan with all sorts of “non-traditional” income. Self-employed people, entrepreneurs, gig workers, retired people, and various full-time investors all have favorable mortgage opportunities in 2020.
These fresh stated income mortgage loan standards are frequently referred to as “alternative income verification” loans.
With these contracts, you are not just only stating your income. Preferably, you are simply using an amazing new opportunity to create alternative ways to support your income.
A stated income loan is a mortgage where you have an opportunity to provide less documentation and easily qualify for a loan by providing bank deposits as proof of income. Today, the reduced documentation requirement means that you need to provide 2-24 months of your bank statements depending on the borrower. The source of income can be perceived by both personal and business bank accounts.
It’s important to notice that stated income loans are still available but not in the same way as they were before the 2008 housing market crash. In the past, as mentioned at the start of the article, you didn’t have to prove any hard evidence for your income at all. Today, they use the bank statements from your accounts as valid proof of income.
Most self-employed people don’t experience problems with providing evidence of a steady flow of money coming into their accounts. As a result, thousands of money lenders help self-employed people to qualify for this new type of stated income loan that is becoming one of the best ways to get out of unexpected financial situations.
In the end, we strongly suggest that you do a bit of research for the most favorable money lending option in your state and carefully examine all the details of the contract before you sign anything.