August 1st, 2013 11:31 AM by Richard T. Cirelli
Stated Income Loans Are Back!
I have to admit, I didn’t expect to see it again, 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 much more conservative, at least so far, but they are creeping back into the market place.
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 including tax returns, etc. The program is designed primarily for self-employed borrowers who may have difficulty meeting traditional income documentation requirements of other lenders. Certain “employed” borrowers with complex income structures may also be eligible.
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, Second Homes and Investment Homes are permitted
· U.S Citizens, Permanent Resident Aliens and Foreign Nationals with a Passport and VISA are permitted
· Down-Payment or equity requirements range 30% to 50% depending on the loan amount
· Minimum Credit Scores of 700 to 740 are required depending on the occupancy and loan amount
· Verification of the borrowers business or employment, assets including sufficient cash-reserves, credit and other documentation are 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 typically a 30-year loan with the interest rate fixed for the first 5-years. The current rate is about 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 and documentation, this loan will be much safer than the previous versions that permitted no documentation of income, employment or assets and even allowed poor credit.