Do Stated Income Loans Still Exist?

If you’ve been doing research on a mortgage, you may have run across the term “stated income loan” and wondered if they still exist.  Have they gone the way of the Dodo bird and clear Pepsi and become extinct?  

The answer is yes and no.  

Stated income loans used to be something that lenders provided with little to no income verification.  Do you remember the movie Liar Liar with Jim Carey?  Well, that was about him getting this kind of a loan, and it was so funny that they made a movie out of it.  Not really, but the premise of stated income loans from 15 years ago probably seems laughable now.

Stated income loans do still exist, but they are much different than they were before the housing bubble burst in 2008.  These days, they are a specialty loan, and usually you aren’t going to get this kind of option from the big banks.  

Why is that?  Glad you asked.  That’s because of the Dodd Frank Act.  After the housing bubble crisis in 2008, good old Uncle Sam created some legislation that required more homework by banks to verify a borrower’s income before they can qualify for a loan.  This verification now comes in the way of tax returns and W2s for conventional mortgages.

The downside is that anyone without those documents may have a tough time getting a conventional loan.  This includes:

• Self-employed with low taxable income
• “Cash” business owners
• Seasonal/sporadic income
• Profitable new business owners (less than 2 years)

Let’s say you’re part of this crew.  Maybe you are a writer, and you just landed your first big gig writing about loans.  You’re clearly very talented, devastatingly good looking, and profitable after 18 months in the game.  Who could I be writing about?  A mystery for sure.  Anyway…

You want to purchase a home, but Rick at the Big Bank tells you that you’ll need to show two years worth of tax returns and W2s to qualify for the loan.  Total bummer because you maximize your legal deductions and don’t pay yourself very much while you’re growing the biz.  This ridiculously handsome writer would be a good candidate for a stated income loan.

So what’s next?  This Hemingway-esque writer would need to make sure he has enough for a sizable down payment (10-20%) and a good credit score.  Then, it would be time to get in contact with a lender that offers stated income loans, like Truss Financial Group.  They offer a common sense approach to lending, and stated income loans are one of their offerings.

As always, be sure that you stay persistent when looking for a stated income loan.  They’re out there.  Now, if you can find me some clear Pepsi, please let me know.  That stuff was fantastic.