Not everyone can meet the bank's strict income verification criteria. For example those who are self-employed and small business owners lack the needed documentation to support their true annual income. As a result they have difficulty being approved for loans and mortgages. Mortgage lenders consequently have begun to offer stated income loan products to help these individuals get over this hurdle.
A stated income HELOC doesn't require that you supply the usual paperwork that states how much money you make a year. You advise him or her what your annual income is and they use that number at face value. Then when you are approved you can access the equity you have in your home via a lone of credit.
Small business owners are able to reduce their taxable income by claiming legitimate business expenses. This presents a problem when it comes to qualifying for loans and mortgages as their taxable income often falls below what is required to be approved for additional credit. The stated income lending products resolve this.
In order to be approved for this type of loan you need to have very good credit and a very high credit score. The lender looks for this because they do not request you to bring in pay stubs or W2s. They increase their risk when they don't verify income, so they look to shore this up in other areas.
The interest rate is often a little higher as well. It is not drastically higher, but again the lender is taking on additional risk and prices the product accordingly. There may be additional fees as well.
Some lenders will have unique criteria for these loans such as how long the applicant needs to have been in business. Additionally some banks may impose limits on how much greater the new monthly payment may be compared to how it was before. The lender simply wants to make sure that all the areas they can verify, are as solid as possible.
If you are self-employed or are paid mostly on commission, do not give up hope on getting a home equity line of credit. Talk to your local financial institution, mortgage broker or search the web for a lender that offers stated income loans or Alt-A products. You may find it is not as difficult to be approved as you first thought. - 20896
A stated income HELOC doesn't require that you supply the usual paperwork that states how much money you make a year. You advise him or her what your annual income is and they use that number at face value. Then when you are approved you can access the equity you have in your home via a lone of credit.
Small business owners are able to reduce their taxable income by claiming legitimate business expenses. This presents a problem when it comes to qualifying for loans and mortgages as their taxable income often falls below what is required to be approved for additional credit. The stated income lending products resolve this.
In order to be approved for this type of loan you need to have very good credit and a very high credit score. The lender looks for this because they do not request you to bring in pay stubs or W2s. They increase their risk when they don't verify income, so they look to shore this up in other areas.
The interest rate is often a little higher as well. It is not drastically higher, but again the lender is taking on additional risk and prices the product accordingly. There may be additional fees as well.
Some lenders will have unique criteria for these loans such as how long the applicant needs to have been in business. Additionally some banks may impose limits on how much greater the new monthly payment may be compared to how it was before. The lender simply wants to make sure that all the areas they can verify, are as solid as possible.
If you are self-employed or are paid mostly on commission, do not give up hope on getting a home equity line of credit. Talk to your local financial institution, mortgage broker or search the web for a lender that offers stated income loans or Alt-A products. You may find it is not as difficult to be approved as you first thought. - 20896
About the Author:
If you are self employed, get more information on the stated income equity line at Pat's mortgage blog.
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