A "stated Income" loan is one in which the monetary income used to qualify an applicant is the amount "stated" on the loan application. In other words, there is no requirement for proof of income in the way of W-2s, tax returns, or paystubs. The loan application is processed and approved or denied based on factors such as the applicants credit score, amount of down payment or equity in the property being used as security, and the amount of savings the applicant has in the bank. These loans are intended for borrowers who do not have easy access to documents that show his or her income. For example, many people receive cash payments for the business they are engaged in and that is difficult to very or prove.
These loans were very popular years ago, and then for a time were difficult to obtain because of a high number of untruthful applications and fraud. Many stated income loans defaulted, which caused the government to step in and call for an end to these loan programs. It is now possible in New York City to obtain these loans again through lenders who understand how to properly process these programs.
The usual flow for the process of funding a loan is:
- The application is completed by the borrower, and all information is required to be truthful and accurate.
- The application and accompanying documentation is gathered in a file by a person called the loan processor.
- The file is submitted to an underwriter, who reviews the entire file and makes a decision based on established guidelines.
- If the loan is approved and everything is acceptable to the lender, including the property, then the loan is funded, which means the money is dispersed.
There is a common sense element to stated income loans. For example if a person who is employed as a taxi driver (a cash-related job) claims to have an income of $50,000 per month, that would be unlikely and the underwriter would most likely ask for written proof of the income. Borrowers in New York City who need a stated income loan should seek out an experienced loan company with staff who understand how to properly process the application from the start, through to the funding.
To ensure applications are filled out accurately and completely, it's a good idea to sit down with an experienced loan representative from Northstar Funding and carefully go through the process.step-by-step. We are happy to help.