How to Get Maximum Value out of Stated Income Loans
Stated income loans can be of great value to you if you’re a contractor or someone who is self-employed. After the market crash of 2008, stated income loans were no longer readily available, but now they are being offered again by more lenders. While not available as consumer loans, these loans offer a way to finance a property in the short term in order to renovated and re-sell it, or to finance a rental property. They are also useful if you’re an investor that needs funds immediately, and is going to receive a large influx of cash within the next couple of months.
Though stated income loans don’t require you to show tax returns or income documents, they do require you to have a few things in place in order to qualify. Regarding real estate, the lender will look at a property appraisal report to determine the condition of the property and what’s needed to improve it. Also, you will need to show a significant amount of savings and a high level of income, and will need to provide bank statements. In addition, you must have a high credit score of 700 or above. The more favorable your financial situation is, the more likely you are to be approved.
There are both advantages and disadvantages to this type of loan. The biggest advantage is that you won’t have to show tax returns or income verification, which is important if you work freelance or as a contractor. Another plus is that, when applied to real estate, you are often able to get up to 70% of the loan-to-value of the property. Also, the loan process for a stated income loan is typically very quick, and for many, pre-payment penalties are not a condition. One big disadvantage to these loans is that the mortgage rate is typically high. Also, the down payment is large, with most lenders requiring 30% or more. In addition, unlike traditional loans, the closing costs are much higher.
To get the best value, it’s important to shop around to find the best the best rates and conditions. Many of these lenders are easy to find with a quick Internet search. Though these loans have higher fees and interest rates, you’ll still do better than with many other investment loans. As long as you have excellent credit, a great income and are able to come up with a large downpayment, you should be able to find a loan that’s right for you.
