What Are Stated Income Loans?

Stated income loans are a type of mortgage loan that allows borrowers to qualify for a loan without providing proof of their income. This type of loan is also known as a “no-doc” loan, as it does not require the borrower to provide any documentation of their income. Stated income loans are typically used by self-employed individuals or those who have irregular income, such as freelancers or independent contractors.

How Do Stated Income Loans Work?

When applying for a stated income loan, the borrower does not need to provide any proof of their income. Instead, they simply state their income on the loan application. The lender then uses this information to determine whether or not the borrower is eligible for the loan.

The lender will typically look at other factors, such as the borrower’s credit score, debt-to-income ratio, and assets, to determine their eligibility. The lender may also require the borrower to provide additional documentation, such as bank statements or tax returns, to verify their stated income.

Benefits of Stated Income Loans

Stated income loans offer several benefits to borrowers. These include:

• Faster approval process: Since the borrower does not need to provide proof of their income, the approval process is typically faster than with traditional loans.
• Easier qualification: Stated income loans are often easier to qualify for than traditional loans, as the lender does not need to verify the borrower’s income.
• Lower interest rates: Stated income loans typically have lower interest rates than traditional loans, making them more affordable.

Drawbacks of Stated Income Loans

Stated income loans also have some drawbacks. These include:

• Higher risk: Since the lender does not have proof of the borrower’s income, there is a higher risk of default. This can lead to higher interest rates and stricter qualification requirements.
• Limited availability: Stated income loans are not available in all states and may not be offered by all lenders.
• Higher costs: Stated income loans typically have higher closing costs than traditional loans.

Conclusion

Stated income loans are a type of mortgage loan that allows borrowers to qualify for a loan without providing proof of their income. These loans offer several benefits, such as a faster approval process and lower interest rates, but they also come with some drawbacks, such as higher risk and higher costs. It is important to weigh the pros and cons of stated income loans before applying for one.