Stated Income

Stated income loans are a very sensitive subject in the mortgage world because of the abuse these programs have had on lenders.  Much debate has taken place over how these loans are to be originated and what type of information is acceptable and not acceptable.  The information I give will concur with our lenders and, to be honest, is viewed as conservative when compared in the mortgage world, but it may still have some conflicts with how lenders view it.

State Income loans are loan programs that allow you to state the income and not have the income verified.  Without verification of income you can see how easy it is to inflate income in order to qualify borrowers for loan programs.  This can be dangerous because if your credit is good enough we can put you into a loan well above your means. Brokers and Lenders that participated in these programs would often put borrowers in loans that were out of their reach, setting them up for inevitable failure.  This has created considerably large defaults in the industry and, as a result, is not offered by most lenders.

The design of the Stated Income program was that brokers and lenders still had the responsibility to accurately report the income on the application, but verification would not be required.  As a result, a premium would be added to the loan.  Now let’s be honest: who in their right mind would put an accurate income amount, yet not want to have it verified in order to save tens of thousands of dollars over the life of the loan.  NO ONE falls in that category.  Lenders and regulators can promote and require it until they are blue in the face, but it does not make sense.  So, when does a program like this make sense?  The program is designed more for the Self-Employed borrower that has the ability to write off a majority of the income made through the business.  Most Self-Employed individuals still have the means to make payments very comfortably, but do not always present the exact income needed to qualify for these homes.  It is in such a situation when I feel that the State Income Loans should come into consideration.