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Stated Income Loans – Mortgage with No Documentation

June 30th 2006

Stated Income Loans – Mortgage with No Documentation

Stated Income Loans

Stated Income loans are a type of loan that allows borrowers with fair to excellent credit to qualify for a mortgage without their income being verified by the bank. Stated Income, Verified Asset (SIVA) loans are primarily designed for self employed people who may not have the means to accurately reflect their income.

Business owners may receive much of their revenue in cash but their cash reserves shown in the bank display a different picture.  The borrowers are required to disclose their two year employment history and state a figure for their monthly income on the Uniform Residential Lending Application (Form 1003).  The borrower may also be required to disclose bank accounts, their retirement programs or other types of assets.

 

The lender will verify the employment history but will not verify the income.  They will also compare the stated income to the occupational averages in the area.  Lenders may deny the application if they believe the income is out of line with the averages.

The SIVA loans can also be used for fixed income borrowers, however underwriters look more closely at applications submitted by salaried individuals who do not provide income documentation.  Also, expect to pay a higher interest rate on these loans than those that require full documentation, and slightly lower interest rates than No Income, No Asset (NINA) and No Doc loans.

 

Although programs are available for borrowers with poor to excellent credit, the minimum credit score is usually 500.  In most cases the mortgage history can not reflect a late payment of more than 90 days.

The higher the credit scores and the better the mortgage history you have, the higher the Loan to Value ratios you can get. This means you can borrow more against your property.  Lenders may also make adjustments for individuals capable of making a large down payment. 

 

Lenders will likely verify the barrower has two months of the monthly PITI (Principal, Interest, Taxes and Insurance) payments in reserves and in some cases when the loan amounts are higher, six months of PITI in reserves.  Also the reserves may be not be based on the PITI payment but on the monthly income stated on the application.

Self employed borrowers may need to produce a business license or other proof of business.  It the borrowers don’t have a business license; they may need to provide the lender with a letter from their Certified Public Accountant (CPA) which vouches for the borrowers ability to generate earnings.

An employee with a salary without a W2 form or pay check stubs may need to produce a Verification of Employment (VOE), which will be sent to the borrower's place of employment.  The employer must verify that the borrower is gainfully employed but will not be asked to verify compensation information.

Even fixed income individuals can get stated loans.  In some cases the borrower gets some sort of stipend, such as Social Security, Disability or pensions.  Lender criteria may vary, but in many cases it amounts to a benefit letter from the payor to the lender which outlines the type of benefit paid. In this letter the amount is either not-included or may be blacked out by the borrower.

 
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Dan Wilson
Best Syndication

Books on Lending

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Important:  The material on Best Syndication is for informational purposes only and is not meant to be advice. You should always seek professional advice before making financial decisions. 
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Copyright 2005 Best Syndication                   Last Updated Saturday, July 10, 2010 09:49 PM