Mortgage Loans

Stated Income Home Loans

   
   
 

Applying for a refinance mortgage or home equity loan includes calculating a debt ratio to make sure it's within the underwriting guidelines, but for some borrowers, that may not be necessary.

While uncommon now, some lenders may be able to streamline the processing of a home loan with less income documentation, such as, tax returns, if certain qualifications are met.

For example, a lender may use the unverified amount of income stated on the application for a streamline refinance. There is a price to pay for this privilege, which is a higher mortgage rate. 

The adjustment to the rate is usually based on the credit scores. For example, there could be a 1/2% add-on to the rate for a score of 720 or better, or a 1% add-on for less than a 720 score. 

Also, lenders offset their risk by adjusting the loan to value according to the borrower's credit scores. For example, a 720 credit score may be needed for a home loan up to 80% loan to value, a 700 score for a maximum 75% loan, or a 680 score for a maximum 70% loan to value.

While a stated income, or no doc loan means no income verification, the income on the application has to be consistent with the employment listed, and there may be asset verification required. A teacher who says he makes $150,000 a year, with no money in the bank, can be a red flag.   

Homeowners who have an existing FHA home loan, may have the opportunity to reduce their monthly payment using an FHA streamline refinance, which has no income or asset verification. 

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