If you’re looking to make a big purchase, such as obtaining a new home, you’re likely going to need to work with a bank or money lender. Understanding the various types of loans out there can help you to determine how best to get the money you need to move forward with your life.
Stated income loans are one such way. Stated income loans used to come in the form of a loan where an applicant would state their income but not have to provide any documentation or evidence. This form of bank loan eventually contributed to the 2008 housing crash and was made to be illegal.
However, since 2010, the stated income loan has come back in a much better form. What is it and why might it be a good choice for you? Read on and we’ll walk you through what you need to know.
What is a Stated Income Loan?
As we’ve mentioned, what form a stated income loan takes has changed over time. These days, it is not legal for a person to take out a stated income loan in order to purchase a for-occupancy property.
Can you still get stated income home loan in some form? Yes and no.
However, stated income loans are still available for those looking to open businesses. Loans that work in a similar manner to stated income home loans are also available to consumers interested in them.
A borrower who is employed would just need to provide their tax returns, W-2 form, and a recent pay stub. Typically, a freelance worker or someone who is self-employed would need to show more documentation because their income situation is more likely to change.
Moneylenders would prefer above all else, at the end of the day, that a borrower have a strong credit score and provide a large down payment. This is the easiest way for them to mitigate the risk of lending money.
A high-income level and a high credit score will paint a picture for these lenders that is more likely to get you approved.
Right For You?
Is a stated income loan the right choice for you? It depends on what your goals and the current situation are.
Many money borrowers use stated income loans in an attempt to buy another rental property. Perhaps, you have a large cash payment on the way and can prove that you do, but you don’t currently have the money in your own account.
Taking out a stated income loan could help you make the moves you need to make right now while allowing the money to come in later.
Also, you might simply not want to empty out your cash reserves in order to buy a property. A stated income loan would allow you to keep the cash in your possession at all times, relying on the loan to help pay for the property over time.
Understanding Stated Income Loans
It’s easy to be confused about stated income loans because all that has changed over the years. The above information can help clear up how a stated income loan works today and how to determine if it is right for you.
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