When are Stated Income Loans the Right Option?
Finding a new home can be a stressful process. The real estate market can be fickle, and you might find the perfect home only to lose it to someone else. So when you finally find the right home, financing can be the most crucial and daunting part of the entire process, especially if your employment is somewhat unconventional. Stated income loans can be a great option for a number of reasons.
In order to apply for this type of loan, you don’t need to hand over pay stubs or W-2 forms. This can be convenient for those who are self-employed and therefore wouldn’t have such documentation in the first place. However, this doesn’t mean that you don’t have to prove your income at all. Lending institutions will often ask for bank statements, though the time frame may vary.
Since stated income loans don’t require traditional proof of income or assets, the down payment is often bigger than that of a traditional loan. If you think this financing route could work for you, consider saving up a larger down payment than you originally planned for. While it may be inconvenient, it’s also a chance to pad your savings.
While this type of loan may not require typical methods of income confirmation, you’ll probably still have to prove that you’re employed, whether that’s through an employer or a third party that can confirm your self-employed status. Many individuals use their CPA, for example. Without all the extra required paperwork, there’s the potential for your loan to be improved more quickly than other types of loans. For some companies, you may need a higher credit score, but some don’t have a credit requirement at all.
Even though this may seem like a stressful process, there are plenty of benefits to a non-traditional loan. If you were to apply for a traditional loan from a bank while self-employed, they may not be willing to accept your documentation, or the process could be drawn out. Their strict requirements often want applicants to fit neatly within certain boxes, and some individuals just don’t fit the mold.
Stated income loans may or may not be right for you, but they have many benefits to consider, especially if you’ve got substantial savings but are unable to verify your income with an employer or tax forms. In a world where more and more individuals are enjoying the freedom of freelance work, you have the opportunity to enjoy more flexible forms of financing.