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Stated Income Loan: What You Need to Know
Stated Income Loan and No Doc Loans
Originally an invention to help small business owners and independent contractors who have very complex taxes, this Stated Income Loan and No Doc Loans grew in popularity during the 1990s and early 2000s. The way that Stated Income Loan and No Doc Loans work is simple; a person states their income to qualify for a new loan. Depending on how high or low the income can be, the rate can be better or worse. Borrowing by stating one’s income has gained a lot of popularity. It’s often easier to get approved with Stated Income Loan and No Doc Loans.
This, of course, has many issues that are yet to be completely solved. Stated Income Loan and No Doc Loans are often called “liars loans,” Stated Income Loan and No Doc Loans have a reputation of being based on lies. This is because many borrowers, especially during the 1990s, would falsely state their incomes in order to get a better rate on their loans, or in order to get a larger amount of money. After too many defaults, and too many lies caught on record, Stated Income Loan and No Doc Loans have spread out in variety.
For instance, one form of stated income loan is called the SIVA loan. SIVA stands for stated income, verified assets loan. This allows you to state your monthly income. However, it’s not a “good faith” loan by any means of the word. You have to prove your income through bank statements or by tax stubs.
SISA loans are the most trusting loan on the market. Here, you state your income, and your assets. The bank won’t ask you to verify either. Still, there are limitations and necessary verification steps, even for SISA loans.
All Stated Income Loan and No Doc Loans need employment verification. For independent contractors, a letter from your local CPA will provide enough proof. Others can get proof by allowing the bank to call your employer. Stated Income Loan and No Doc Loans also might ask you to file an IRS form which allows the bank to get tax verification from the IRS for the past two years. Most of these measures are done to keep people from lying in order to get more cash.
Many Stated Income Loan and No Doc Loans are declined simply on the base that the salary doesn’t match the job. For instance, banks will decline giving a loan to a janitor who claims to make $20,000 a month. The pay is astronomical, and doesn’t match the job at all.
Along with employment verification, most Stated Income Loan and No Doc Loans come with higher rates, and often come with high premiums that need to be paid. It’s understandable; Stated Income Loan and No Doc Loans are very risky, and a lot of faith is being put in the borrower. Many loans of this genre have experienced delinquencies once a borrower realizes that they cannot afford to pay off the loans because of a fudged income. If a Stated Income Loan or No Doc Loans is being used for a home or a car, expect to have a higher down payment ready in order to purchase anything. Having a high credit score will keep you from having to worry about a lack of financing in other fields.
The bottom line about Stated Income Loan and No Doc Loans is that they are a good option for people who cannot be approved, or do not have the resources for a full documentation loan. Stated Income Loan and No Doc Loans are probably not a fiscally wise decision for borrowers who can go through the full documentation loan process, simply because of the higher rates and the high risk associated with this loan genre. Stated Income Loan and No Doc Loans will continue to have more restrictions as the years pass, so it’s important to weigh your options.
