Stating your income and assets

Some mortgage programs allow you to "state" your income. For instance, if you are a small business owner, and your tax returns don't show all the income you receive, you can "state" your income to the loan officer and it's not verified. The income stated must be reasonable for the industry.

This type of program is good for any type of job that has difficult to document income. It is often used for jobs where cash tips are involved. Many people who have jobs where they earn regular pay and cash tips, live off of the tips they receive. Since that money is never tracked, and the regular pay usually isn't enough to qualify they can use this type of stated income program.

A SISA loan is one where lenders allow you to "state" your income, as well as "state" your assets.

A good time to use a stated income and stated asset type loan is when you have a job that you have had for less than a year and you receive a considerable amount more money than you received at your previous job or you now receive commissions and/or bonuses. Many lenders will not allow you to use this commission/bonus income because you do not have a history of receiving it or they will not allow you to use all of your new salary because they are using an average of your new income and your previous year's income. Because of this, a stated income loan will work well because you can state how much money you truly make to help qualify you for the loan instead of dealing with the lender who might not normally accept all of your income. There are many other examples of good situations and scenarios that may be helpful to use a stated income stated asset type loan and this was just one example of many.

Some state income loans require the borrower to sign a 4506 form. The 4506 form authorizes the lender to request original tax returns from the IRS. The lender will only request original tax returns if the file is being audited or there is suspicion of fraud.

Some lenders have "stated income" programs where the rate is the same as "full documentation" programs.
The benefit of doing a "stated income" loan in this situation is that it requires less paperwork form the borrower.

With some mortgage programs, you have to have a higher credit score to use stated income than if you were to provide full documentation. If your score is too low, you may be disqualified from such programs or the interest rate may be much higher. Always take care of your credit.

SISA loan guidelines are more restrictive than those available on SIVA (Stated Income but Verified Assets) mortgage loan programs.

Example: Husband and Wife where husband may have little assets but wife may has more, but cannot be on the loan due to lower credit score.

Stating the assets would make sense in this situation.

Stating your income or assets in the Mortgage Loan Documentation process is the risk-based pricing factor that affects the overall interest rate an individual borrower will qualify for.

Just because you don't have to prove your income doesn't mean you won't have to prove your employment. Lenders typically want two years of verifiable employment history to deem your income as "stable and likely to continue." If you are unable to prove your employment there may still be loan options available. Ask your trusted mortgage broker if you qualify for a No Documentation loan program.

When stating your income and assets on a stated income and asset loan you must not inflate it. If you knowingly state false income this is considered fraud. The Stated income and stated asset loans are for borrower that do not have traditional documentation to prove their income.

Stating your income and assets is an alternative offered by lenders in the mortgage process. Lenders generally charge a slightly higher interest rate because there is less assurance that the loan will be repaid. Stating your income and assets can be an attractive alternative for self-employed borrowers.

» DISCLAIMER: The information contained in this article on 'Stating your income and assets' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.