Documenting Income

Stated Income Loan - Stated income loan programs are offered on fixed rate mortgages, adjustable rate mortgages, or on negative amortization mortgages. They do not require income verification.

Some lenders now allow for the borrower to actually document their income with a simple verification of employment from the employer, thus doing away with the need to document W2s, tax returns, and paystubs.

Almost any type of loan today has a stated income feature if needed.

Stated income loans are available for self employed as well as W-2 employees, however many lenders will offer a slightly higher rate for W-2 employees because their income is usually easier to document.

A Stated Income Loan requires less paperwork than normal for approval. The income is stated on the application. Tax returns, w-2 forms, and pay stubs are not required. The stated income should be reasonable for your occupation

Under "No Income Verification" loan programs, also sometimes called "Stated Income" or "No Income/No Asset" programs the applicant's income is not verified by any of these methods. The applicant is qualified from the income stated on his/her loan application.

These programs were initially created for borrowers who are self-employed and may not be able to verify all income from traditional sources such as tax returns.

These types of loan programs allow a credit worthy borrower to access financing through no traditional documentation. There are a variety of programs available. Some programs even allow a borrower to finance 100% of the property value for a refinance or a purchase.

Most lenders also charge a higher rate on a stated income loan.

Stated income loans are very popular with business owners. Since they write-off a lot of their expenses at the end of the year on their taxes they sometimes have very little net-income to qualify for a full-doc loan.

Tailored perfect for business owners and comission based sales people.

Stated income loans are used when a borrower cannot provide income documentation such as paystubs and tax return information. In a stated income loan, the client "states" the amount of income that they make and the position and for how long they have worked. Lenders usually require the borrower be employed for a minimum of 2 years for stated income loans. Also, when you state the income, it must be typical for that job title. You can't have a Mc'Ds cashier making $8,000 a month. The stated income must be believable.

Generally a no income, no asset (NINA) loan requires no verification of income or assets. However verification of employment is required and 2 years of same line of work is required. A No Doc loan is a NINA without verification of employment.

Some banks offer borrowers with high credit scores stated income loan programs with no adjustments, meaning the borrowers would not get "surcharged" or penalized for not furnishing proofs of income. These stated income programs offer interest rates that are indentical to that of full documentation loans.

Stated Income programs are ideal for those clients with non-documentable income sources. Typically for those who may receive portions of income in cash.

A stated income loan normally requires a slightly higher FICO score to qualify for the same loan to value as compared to a full documentation loan or bank statement program.

If you adhere to certain loan to value restrictions, you may be able to state your income and get the same rate as full documentation when refinancing your home.

Stated income loans are mainly for self-employed and commissioned borrowers. Stated, no doc, and no ratio loans can also be used for tipped employees too. Waiters, waitresses, hair dressers, etc... are all common professions that stated, no doc and no ratio income loans can benefit. With stated loans you state the income you truly make. With a no ratio loan you fill in your employment info. except no income is documented and no debt ratio is calculated. Lastly with a no doc. loan you do not state your employement info. or your income and no debt ratio is calculated. Some of these programs may require you to have a certain amount of money put away somewhere, known as reserves. A high credit score is generally needed for these types of programs, and the less documentation that is required, will usually result in a bigger rate bump for utilizing one of these programs.

There are two common types of Stated Income Programs:
Stated Income Verified Assets Loan: (SIVA) - Loan approval is based on your stated income, credit history, and verified liquid assets (bank accounts, 401k, stocks, bonds, etc.). The Verified Assets should be consistent with the income claimed.

Stated Income Stated Assets Loan (SISA) - This loan has no assets being verified. You only state your income and state your assets on the application. This program may have a slightly higher interest rate because the assets are not verified.

Some variations of stated income include:
1)Reduced Doc - Income and assets are disclosed on the application but income is not verified. Assets are verified.

2)No Ratio - Income is not disclosed on the application and assets are stated and verified.

3)No Income No Asset - Income and assets are not disclosed on the application and are not verified. Employment not stated or verified.

Lenders will look at the "stated" income to verify it is not out of wack, you cannot state $80,000 worth of income working part-time as a cashier. This has to be an accurate figure of income actually made.

Stated-income mortgages are for people who make the money they say they make, but that amount doesn't show up on the bottom line of their income taxes.

Stated Income loans still must be approved by an underwriter. The stated income must make sense for the employment that the borrower has.

Under stated income programs your income will not be verified but your employment will. No employment verification programs are typically called No Documentation or NINA (No Income, No Asset).

It is crucial that you counsel with a competent Mortgage Broker or Mortgage Planner before entering into a Stated Income program. It is their job to thoroughly investigate all of your options, income sources and figure corresponding ratios in order to recommend the best product. A good mortagage planner has the heart of a teacher, not a salesmen and plays the role of a trusted advisor.

Please don't make the mistake of withholding information or providing inaccurate information that they may need to properly qualify you for a stated income loan. You may be tempted to fudge the numbers a little in order to qualify for that dream home, but this could spell disaster as you may be able to qualify for more home than you can afford.

You may be required to sign a 4506-T that will allow the lender to pull your tax returns if needed. Not all lenders will require this form and your lender will know if it will or will not be.

You are responsible for providing an accurate figure when the loan officer ask's for your income amount. The loan officer should not coach you or fill in the amount for you. If the loan is audited and fraud is discovered you and or the loan officer can be held accountable under the law.

They say you can beat the tax man or you can beat the bank, but you can't beat them both. If your income is difficult to document because of commission based pay or revenue from self employment, stated income loan programs are available which enable borrowers with sufficiently high credit ratings to borrow money at competitive rates. Programs are often available to borrow money equaling up to 100% of the value of your home, without the need to verify your income or your assets, or in some cases without the need to verify either.

Stated Income Loans are for borrowers with income sources that are not easily verified through normal channels. So, lenders allow borrowers to state their true income without verifyng it. These loan programs are usually for borrowers with good credit and come with a higher interest rate.

Many self employed borrowers take advantage of stated income loans so they do not have to provide tax returns to qualify.

As you move down the line on the different programs, from SIVA to SISA to NINA the interest rate will move a bit higher each time. Depending on your credit scores and LTV (loan to value) you might be able to qualify for one but not another.

Stated income is a very popular form of loan qualifying. As you're probably aware, most successful business owners write off a lot of their expenses at the end of the year on their taxes, causing very little net income to be used for qualifying for a loan. You also see this with borrowers that make tips, bonuses and commission as their sole form of income.

No Income Verification Mortgage - No Income Verification Mortgage is a type of loan program in which the loan applicant discloses the amount of his income, but is not required to prove it to the lender bank. In other words, the applicant does not submit paycheck stubs, W2s, tax returns and the like throughout the loan process. The loan application is underwritten base on the borrower disclosed income and other qualifying criteria.

These types of loans are great for people who have hard to document income, are self-employed, and/or are commissioned employees. No income verification can be done by simply stating your income on the application and not providing the paperwork associated with it. Also, they can be done as a no ratio loan and your employer info. is written on the loan application but no income is disclosed whatsoever. Finally there are no doc. loans where no employment information and no income is completed on the loan application anywhere at all.

No Income loans were designed for people with an income, but the income may fluctuate due to investments or other factors. It was also designed for high income people, that are willing to pay a higher rate, for a No Income Mortgage to maintain their financial privacy. No Income will be listed as NINA (No Income No Assets), NIVA (No Income Verified Assets) or NISA (No Income Stated Assets).

Reduced Documention Loans - There are many programs available that are for people who may not qualify for the standard full documentation required by many different lenders. Some of reduced documentation loans compensate for the lack of supportive documentation that may need to be required.

Some of the examples are as follows:

Stated Income, Verified Assets or SIVA
Stated Income, Stated Assets or SISA
No Ratio
No Income, No Assets or NINA
True No Doc

A Stated Income Loan requires less paperwork than normal for approval. The income is stated on the application. Tax returns, w-2 forms, and pay stubs are not required. The stated income should be reasonable for your occupation

Stated-Income Stated-Assets mortgage is a type of mortgage program in which the borrower does not need to furnish proof of his income and assets. In other words, no paystubs, W2's, tax returns, bank statements, are needed to document the borrower's financial ability to repay the loan. The applicant's income is merely disclosed, or stated, on the Uniform Residential Loan Application.

When your scores are high enough the lender may even offer a reduced docmentation program at no additional cost to you. They look at the higher scores as you being responsible enough to know what you can afford and what you can not. Also the higher scores equates to less risk for the lender.

Reduced documentation loans are not an opportunity to falsify income in order to obtain larger loans. This type of mortgage fraud is being more closely investigated by lenders and the FBI.

Reduced Documentation loans are for boorowers that have unverifiable income or assets. Reduced documentation also are for borrowers that do not want the hassle of loacating documents or who want to keep their information private. They are willing to pay a premium for this usually paid for with higher interest rates or points.

A Stated-Income loan for a self-employed borrower means you do not have to provide income documentation but you do have to provide proof of employment. Past two years business license will usually suffice.

Self Employed borrowers typically use reduced documentation loans due to tax deductions reducing the actual income/profit of their businesses.

Cash tip earners also use reduced documentation loans since their cash income is not documented.

If your credit scores are high enough many lenders will offer your reduced income documentation. This reduces the amount of documents needed to prove your employment history, income, or assets. Ask your Preferred Mortgage Professional if your credit qualifies for a "rapid" processing feature.

Many lenders even offer reduced documentation loans for borrowers who have salaried, W-2 type employment. Why would a lender do this? Because in addition to the salary the borrower may have other income which cannot be documented. Examples of such income include a side business, room rental, income from loans to family or others and many other situations.

Some reduced doc programs only need 6 months worth of bank statements.

Another example of reduced documentation, or alternative documentation, is using 6, 12 or 24 months bank statements to verify income. With a bank statement program most lenders will add up the total amount of the deposits for said number of months and then divide that total by the total number of months being used and they will use this amount for your average monthly income. Some lenders will only use a percentage of the avg. monthly income calculated but most lenders will use the full amount.

The Reduced Documentation loan is geared toward the self-employed borrower and those whose work situations don’t fit the standard mold. It reduces the amount of paperwork you need to gather, eliminating many of the steps required when applying for a loan.

Choosing a reduced documentation loan should not be used in order to afford more of a house than you would be able to on a full documentation loan. These loans are designed to accommodate those customers with hard to prove income.

When using bank statements to qualify for a limited documentation loan you typically can use your personal bank statements up to 100% of the deposits over the specified period of time (6, 12 or 24 months) and when using business accounts it is typically 75% to 80% of the deposits.

Often the lenders offset their risk with making these loans by increasing the interest rate or reducing the LTV.

Many times if your credit score is 720 or higher, you can obtain a reduced documentation loan for the same rate as if you fully documented your income & assets.

No Ratio Loans - No Ratio loans do not require income to be stated on the application nor is it verified. The No Ratio loan does not take into consideration your debt-to-income ratios. This type of loan is perfect for someone that has high debt ratios. You can get up to 100% financing with no ratio loans depeding on your credit.

Borrowers with good credit history could qualify for no ratio loans. Often 100% financing is offered by many lenders, however, the interest rates are always higher than the loans with less than 100% financing.

No ratio loans are great for investors, individuals who do not want to deal with the hassle of providing a lot of income documentation, borrowers with potentially higher than normal debt to income ratios, borrowers who have hard to document income, borrowers who are self employed or commissioned, and many other home loan scenarios. Keep in mind that along with the reduced documentation you will generally be required to pay a higher interest rate which equates to a higher mortgage payment. Ask your mortgage professional to show you the difference in rates and payments between utilizing a full income documentation program and a no ratio program.

No ratio option allows borrowing more than a borrow would normally qualify. So, it is important for each borrower to determine how much they could truly afford to prevent potential personal financial disaster.

This is a great program for getting around ratio issues. Especially if you can't "state" income due to job type and not being able to "state" a high enough, beleivable income.

This is also great for investors that have good income but ratios are out of whack due to "negative rent" on other investment properties.

A no ratio loan typically carries a slightly higher interest rate due to the fact your income is not a factor in the loan qualification process.

These loans are usually only available to borrowers with very good credit scores or borrowers who are borrowing a lower percentage of the value of their property. The underwriting theory would be that the added risk associated with not factoring the income ratios is offset by the good credit or low loan to value.

Many property rehab projects, or quick construction projects are financed with no ratio loans.

You are responsible for providing an accurate figure when the loan officer ask's for your income amount. The loan officer should not coach you or fill in the amount for you. If the loan is audited and fraud is discovered you and or the loan officer can be held accountable under the law.

No ratio is an excellent option for self-employeed borrowers, who can actually afford the payments, but who have problems documenting the income. For example, a businessperson who owns ten stores will have difficult time documenting the income even though his/her income is high enough to qualify for a fully documented loan program.

Even though incomes are not disclosed by the homeowner or verified by the lender, the source of income, the homeowner's employment, is still verified.

No Ratio Loans are actually much easier to process for everyone involved in the transaction because there is less paperwork. You have no income documentation/verification along with no assett documentation/verification.