Stated Home Loans

| November 5, 2011

Checking Out The Possibilities Of Stated Home Loans

Are you interested in stated home loans? Stated income mortgages refer to types of loans that require less documentation than standard mortgages. These are also referred to as no documentation or low documentation programs. Here are some things to know about these programs.

People that may qualify

People that are self employed, fall into this category. You may not have W2 and employment records. Thus, you cannot provide these to a lender. You cannot show pay stub receipts either. Perhaps you make good money, but the work is seasonal. It may be hard to show a lender that you have a steady source of income. Maybe you work on commission. Your income can be irregular. In these cases, you can still get a mortgage and buy a home.

Documentation

These programs are not designed to be a free ride to a mortgage. They are for people that cannot document their income. Basically you are required to state your income for the previous two years. You must also have good credit.

A normal mortgage can require an enormous amount of documentation. You will be required to show income tax forms, check stubs, W2 forms, and bank statements. You may need a statement from a landlord. If you have had a bankruptcy, you will need to provide the papers for that. There can be many other requirements.

You still need to prove to the lender that your credit is good. You must also show that your debt to income ratio is within their guidelines. A lender may require a debt to income ratio of 36 percent or less. This means that your debts cannot be more than 36 percent of your income. Here is an example.

Suppose your total income is $50,000 annually. Your rent may be $800. You may have $250 a month in charge card payments. Your car payment is $450 each month. You have another $250 a month in other bills. This totals $1750 per month. Your monthly income on $50,000 is $4312. $1750 is 41 percent of $4312. You would not qualify for the mortgage with a 41 percent debt to income ratio. To qualify, you would need a monthly debt of $1552 or less. You need to pay off about $200 in monthly debt.

Your monthly debt does not include certain bills. Your utility bills are not counted. Things like land line phone bills do not count either.

Expense

These low document programs are not without a price. You may have to pay more for your mortgage. Mortgage points may be considerably higher. Points are loan percentage amounts. For example, one point on $100,000 is $1,000. If you pay one or two extra points, the amount can be considerable.

Summary

Are you self employed or have income that is irregular? Maybe you work on a commission or your work is seasonal. Is your credit good? It can be almost impossible to provide the necessary documentation to get a mortgage. Stated home loans can be a good way to buy a house. You will still need to prove your debt to income ratio. It may cost you extra points on your mortgage. However, it may be your best option for a mortgage.

Category: Home Loan

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