A Guide to Understanding Stated Income Loans

When you apply for a traditional home loan, you generally are applying for full-doc financing. This means that all standard documentation must be provided to the lender for review during the underwriting process. These documents range from tax returns and W2s to bank statements, business income and expense statements for self-employed applicants and more. An alternative to a full-doc loan is a stated income loan. With a closer look at what stated income loans are, you may decide that this is the right financing option for you to pursue.

What Are Stated Income Loans? 
As the name suggests, with a stated income loan, you are stating your income and are not required to provide supporting documentation. These programs are also commonly called no-doc or low-doc loans because they do not require you to provide tax statements or forms, paystubs or other common documentation. Instead, the lender will use the income that you have stated on the application for underwriting purposes. Most commonly, stated income loans are used by self-employed individuals who may have difficulty accurately documenting their full take-home income. Be aware that the income stated on the application should be accurate and truthful.

Taking Advantage of the Benefits of Stated Income Loans 
Regardless of whether you are a self-employed applicant or you are looking for a streamlined loan process that does not require you to submit a stack of paperwork, you may appreciate the benefits of a stated income loan. Many people are able to close on their home faster with a stated income loan because the lender does not require you to pull together a huge stack of documents and because the lender will not need to take time to review that documentation. Before you can take advantage of the benefits of stated income loans, be aware that lenders may have stricter requirements in other areas. For example, you may need to make a larger down payment and have a higher credit rating in order to qualify for this type of loan program. These additional requirements for loan approval vary by lender, so you should inquire about them with each lender who you speak with.

Stated income loans are offered by many lenders today, but they are not as common as full-doc loan programs. With this in mind, you may need to carefully examine all options before you find the right stated income loan program for your needs. If you are able to provide full documentation and simply are not interested in doing so, it may be wise to obtain financing quotes for both full-doc and stated income loans. By doing so, you can make an informed decision that is based on a thorough comparison of all options.