Stated Income Mortgage Loan
A stated income mortgage loan is different to a standard mortgage in the sense that the borrower doesn’t need to provide documented proof of income! Basically, the stated income mortgage loan lender takes the borrowers word for how much they earn.
In fact most of the lenders of stated income mortgage’s agree not to verify whether you really do bring in the amount of income that you have stated. This has garnered the stated income mortgage loan, the flattering name of a “Liars loan” because you could feasibly state that you earn more income than you actually do! (This sometimes makes these stated income loans a target for fraud).
However, some lenders will require some tax returns forms or permission to check with the tax office whether you really are earning what you say. Almost always, the bank will not check – but this is a precaution in case they suspect fraud and need to check your background.
You can also get a better rate if you apply for a stated income verified assets loan or a “SIVA” – Where approval is based on you providing evidence that you own particular assets. Alternatively if you can’t verify this information, you should go for a SISA or stated income stated asset loan. However, be prepared to pay a higher interest rate on this type of stated income mortgage loan.
Who Might Need Stated Income Mortgage Loans?
These stated income mortgage loans are designed for people who can afford the mortgage that they want but may find difficulty in providing documented evidence of their earnings which is a requirement for most standard mortgage types.
Typical examples of the type of person that may need a stated income mortgage loan are newly self-employed people who may not have tax returns yet to document earnings. Another example is somebody who has received a recent pay-rise but can’t provide long-term proof of their current earnings. (Mortgage requirements are normally 2 years worth of documented income).
The cost of a stated income mortgage loan is obviously higher than a fully documented standard loan due to the fact that a lying is a big possibility, but stated income loans are actually slightly lower priced than a mortgage that has no documents at all!
Documentation needed will be things such as verification of assets, Proof of 2 years being in a certain industry of employment or self-employement. Remembering that the stated income needs to be similar to the average of the industry you’re working in (unless you can provide evidence to back yourself up for claiming a higher income).
