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 pay stubs, 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.

Reduced Documentation loans are for borrowers that have unverifiable income or assets. Reduced documentation also are for borrowers that do not want the hassle of locating 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.

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.