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STATED INCOME

STATED INCOME GEORGIA MORTGAGE LENDERS 

To sum it up, stated income mortgage lenders allow Georgia mortgage applicants to simply state their monthly income on a mortgage application instead of verifying the actual amount of income reflected on their tax returns.

The original stated income method was originally intended for self-employed borrowers with complicated tax return schedules, but has recently become more widespread. This new way of documenting income has become more widespread because more often than not self employed and commission borrowers don’t show as much income needed to qualify for their dream home! 

For those familiar with this type of financing, stated income loans are often referred to as “liar’s loans” because it is suspected that many borrowers forge the income in order to maximize their purchasing power.

TRUE STATED INCOME LOANS NO LONGER EXIST! Since the recent mortgage cash that almost destroyed the us economy new regulations have been put into place. Under the new law mortgage applicants must document their ability to make the mortgage payments.

A full documentation loan requires that you verify income with tax returns and/or pay stubs and also verify assets. That’s just listed here for comparison sake; it’s not a stated income loan.

DOCUMENTING YOUR STATED INCOME- Today a select number of stated Georgia mortgage lenders will allow you to state your income on your profit and loss. However they will require you to document your income via bank statements for the past 12-24 months.

STATED INCOME VIA PROFIT AND LOSS STATEMENT – However, in all of the above cases the bank or lender will verify your employment by calling your employer, or requesting a CPA letter if you are self-employed. This is important because your job title will determine what you can state in the way of income.

If you’re a doctor, it’d be normal to state that you make $50,000 a month. But if you’re a kindergarten teacher, underwriters won’t believe that you’re making $10,000 a month. It’s just not likely, nor does it make sense for the position. And for this reason, many loans that “overstate” income will subsequently be declined.

It’s actually quite common to see a mortgage declined on the basis that the income does not match the job title/description, or seems too high for the related position. And if you’re curious where underwriters determine how much a certain occupation should earn, check out Salary.com. That’s where many are instructed to pull the numbers to see if it adds up.

Another “setback” to a stated income loan is that a bank or lender can ask that you fill out an IRS Form 4506, which basically authorizes the lender to request your tax returns for the previous two years.

Although it’s not common for them to actually look up your returns, it can be enough to deter a would-be “liar” from overstating their income. It’s most common for a lender to pull a 4506 only if you become delinquent on the loan in a short period of time. But if they do pull a 4506 and find that you indeed overstated income, you could be face some steep consequences, so take caution.

STATED INCOME MORTGAGE LENDERS = LITTLE HIGHER INTEREST RATES- If you do choose to state your income, you must pay a premium because you’re putting more uncertainty and risk in the hands of the lender and subsequent buyer of the loan if sold on the secondary market. For this reason, interest rates on stated income loans are often .25% to .50% higher than a full doc loan.

Related to that, you may also find that you’ll have to put down a larger down payment or sport a higher credit score to obtain the financing you need. Again, this becomes an issue of layered risk, and because you chose to state your income, the lender may limit risk in other departments such as credit and down payment.

In closing, it’s probably safe to say that stated income loans are becoming a lot more restricted because of recent credit tightening worldwide. You may find that the option is becoming less prevalent, forcing many borrowers to provide full documentation or come to the table with a larger down payment.

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