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Navigating the World of Stated Income 2nd Mortgages: What You Need to Know

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A stated income 2nd mortgage is a type of mortgage loan that allows borrowers to qualify based on their stated income, rather than their documented income. This type of loan is often used by borrowers who are self-employed, have a fluctuating income, or have difficulty proving their income through traditional documentation methods. In this blog, we'll discuss what you need to know about stated income 2nd mortgages.

  1. How they work: Stated income 2nd mortgages work by allowing the borrower to declare their income without providing any documentation to support their claims. Lenders will typically use alternative methods, such as credit scores and bank statements, to determine the borrower's ability to repay the loan.

  2. Advantages: One of the main advantages of a stated income 2nd mortgage is that it allows borrowers who have difficulty proving their income to still obtain financing. This can be particularly useful for self-employed individuals or those with fluctuating income.

  3. Higher Interest Rates: It's important to note that stated income 2nd mortgages often come with higher interest rates compared to traditional loans. This is because lenders view them as higher risk since they do not have solid documentation of the borrower's income.

  4. Cash Out: Stated income 2nd mortgages are often capped a combined loan-to-value (CLTV) of 85%. This helps to reduce the risk for the lender and increase the chances of recovery incase of default.

  5. Limited Availability: Stated income 2nd mortgages are not available through all lenders, and those that do offer them may have stricter lending criteria. It's important to shop around and compare options to find a lender that is a good fit for your needs.

  6. Alternative Options: If you are unable to qualify for a stated income 2nd mortgage, there are alternative options available. For example, you could consider a hard money loan or a private loan, both of which may have more lenient lending criteria and allow you to obtain financing without proving your income.

In conclusion, stated income 2nd mortgages can be a useful tool for borrowers who have difficulty proving their income and need cash, without refinancing their 1st mortgage. However, it's important to understand the higher interest rates and down payments associated with these loans and to shop around for the best option for your needs.

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