In years past it was much simpler to apply for and be approved for a stated income home loan. You did not need to have an exceptionally high credit score, or even necessarily a down payment and you could be approved for a mortgage without providing documentation supporting your earnings.

Default on Stated Income Loans

Well the landscape has changed and mortgage companies that allow stated income for financing are no longer being as fast a free with handing these out. You need to establish yourself as being much more credit worthy in today’s environment. In the post sub prime mortgage meltdown, default on stated income loans is on the rise.

Introduced as an opportunity for those with income from difficult to verify sources, stated income home loans were a boon for the self employed and commissioned sales people. People in these circumstances often have difficult time providing proof of their earnings. For example, they are not given pay slips, or even W2’s. Sometimes the mortgage rate or associated fees are a little higher, but these costs are offset by the opportunity to purchase home where you otherwise may not by able to under traditional qualifying criteria. And if you FICO score is very high, you can even finance one hundred percent of the purchase price. Naturally, if your credit score is way above average, high interest rates can be mitigated.

Stated Income Mortgage Rules

Hopefully with the tighter controls on qualifying for stated income home loans, they can work toward shaking their stigma as liar loans. You see it was not uncommon for potential home buyers to opt for this program even when they were capable of meeting the requirements of full doc loans. They would misrepresent their borrowing capacity so that they could be approved for a mortgage that was in fact beyond their means. What these applicant don’t realize is that lending institutions have put these policies in place to not only protect themselves from foreclosing, but to protect their clients from being put in a situation that will ultimately be difficult for them to live up to. Stated income home loan rules are put into place for your own protection and it really is not in your best interest to try to circumvent them.