Homes By Pat Ford

Are Today’s stated income loans for real?

FAQquestion_markStated income loans are the kind of loan where you can state your income and the lender will just use that to figure the amount of payment that you will be approved of for a loan.  They were especially popular for self-employed applicants who didn’t want to supply pages and pages of tax returns or who did not show all their income on their tax returns.   They went away after the recent market crash and lending problems because many of the loans of that era were approved for buyers who could not afford the payments of the house they were buying

Often these loans were used to simply get a buyer approved regardless of their income.  An example that I can give you from when I was lending 10 years ago.  A buyer came to me to get a loan, he told me that he was making $5000 a month working in a Starbuck café.  I knew that didn’t make sense and he would be able to afford the house with only that income.  But, a stated income loan of that era would never question.

Well this week, I received an email from a lender saying “Stated Income is back!”.   I wanted to know the details and read the email including the fine print.  The fine print says that a form 4506-T is required.  A 4506-T is an IRS form. It is used by the lender to request a copy of your tax return.   What this means to you, is that your income will be verified through IRS and only IRS reported income will be counted.

So, in answer the question, are they real, the answer is yes.  The benefit is that you don’t have to supply paystubs and w-2s (or tax returns if self-employed) but may have to wait for IRS documents.   And this could come at a slightly higher price for your loan.

Posted on January 15, 2015 at 9:33 am by Pat Ford

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