February 20th, 2014 1:49 PM by Richard T. Cirelli
Stated Income Loans Are Back!
I didn’t expect to see it this soon, but only about 5 years after the mortgage meltdown we are seeing a return to some of the products that were blamed for the meltdown. This time around they are more conservative, at least so far, but they are back in the mortgage marketplace.
What is “Stated-Income” or “Lite Doc”?
As the name implies, the borrower “states” his/her income but the lender does not verify it with the usual documentation that typically includes tax returns, etc. The program is designed primarily for employed and self-employed borrowers who may have difficulty meeting traditional income documentation requirements of other lenders. This product is being offered by a very small number of lenders that specialize in products not offered by the larger, mainstream banks or lenders.
The Basic Guidelines:
· Loan Amounts up to $2,000,000
· Purchase and Refinance transactions are allowed
· Owner-Occupied and Second Single-Family Detached Homes are permitted.
· U.S Citizens and Permanent Resident Aliens are permitted
· Down-Payment or equity requirements range 30% - 40% depending on the loan amount
· Minimum Credit Scores of 700 are required.
× Significant Cash Reserves are required - depending on the loan amount
· Verification of the borrowers business or employment, assets, credit and other documentation required
· The amount of income stated is expected to be commensurate with the amount of their liquid assets,
credit history, etc.
· The loan program is a 30-year loan with the interest rate fixed for the first 5-years - @ 5.50%.
This product should open the door for so many qualified home buyers that have been shut out of the market due to restrictive lender documentation requirements. With proper equity, credit and reserves, this loan will be much safer than the previous versions that permitted no documentation of income, employment or assets and even allowed poor credit.