Stated income loans
A Stated income loan is a mortgage in which the broker does not verify the borrowers income records (W-2 forms, income tax returns, pay stubs, etc.). In its place, the borrower states his income and the lender takes his word for it.
These kinds of loans are offered in many different circumstances including a large range of credit scores and subprime borrowers. In past situations, these kinds of loans have turned out to be easy targets for fraud due to their lack of documentation needed to request one and appropriately have developed the nickname of ‘liar-loans’.
Stated income loans are technically intended for borrowers who may have trouble in verifying their income or may not qualify for a traditional loan standards. This may be due to the need of a large quantity in a small amount of time, a bad credit score, an increase in salary that is not yet documented, insufficient paperwork, or other conditions.
A few years back when the economy thrived and the real estate business was at its peak stated income loans was a standard practice in the mortgage business. Although it is no longer a usual scenario, several lenders still provide these kinds of loans if the borrower has at least 35% of equity in the deal. The hard money industry currently faces numerous restrictions that limit hard money lenders to use high interest rates.