Applying for a home equity loan or refinance mortgage includes calculating a debt ratio to make sure it's within the underwriting guidelines, but for some borrowers, that may be a problem.

While uncommon now, some mortgage lenders, however, may be willing to expedite processing a home loan with less income documentation, such as, tax returns, if the loan to value is low.

Instead, the lender will use the unverified amount of income that is stated on the application. There is, of course, a price to pay for this privilege, and that price would be a higher mortgage rate. 

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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 700 or better, or a 1% add-on for less than a 700 score. 

Also, lenders offset their risk by adjusting the loan to value according to the borrower's credit scores. For example, a 700 credit score may be needed for a home loan up to 80% loan to value, a 680 score for a maximum 75% loan, or a 660 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.