When it comes to getting a home mortgage, there are several options. Some of them revolve around special state and local programs. Others, such as FHA and USDA loans, rely on certain criteria established by the federal government. And still other options involves what is sometimes termed “creative financing” for things like interest-only loans, piggyback loans and wraparound mortgages.
Other options for financing also include “no-doc” or “low-doc” home mortgage loans. These types of home loans require less documentation than your standard mortgage, allowing you the ability to qualify for more based on your good credit, or on the income you say that you make. One of these types of loans is the stated-income mortgage loan.
Stated-income mortgage loan
In this type of loan, the lender allows you to turn in a signed statement (sometimes backed up or witnessed by a lawyer or your accountant) that offers up your monthly income. This type of home loan general helps those who are self-employed, or who make more money from tips or commissions. Here is what MSN Money says about who benefits from a stated-income mortgage loan:
“They work for cash. They might be cleaning people or people who work in restaurants,” McLaughlin says. “It is also good for self-employed borrowers who actually make gross sufficient amounts of income, but write off a lot on their taxes. They have the capacity to pay the loan back, but what they file with the IRS doesn’t reflect their real income.”
It is important to note, though, that such home mortgage loans come with a price: you will pay more in interest. And often, lenders will require a credit score of at least 680 in order to qualify.
If you want to purchase a home, but your tax returns are not properly reflecting your monthly income, a stated-income mortgage loan may be right for you. However, you should realize that you won’t be able to take advantage of other programs, such as state and federal programs, when you go with any kind of “low-doc” or “no-doc” mortgage loan. And you should be prepared to pay a higher interest rate.