Stated Income Loans in Today’s Real Estate Market
Prior to the recent housing boom and bust, a person could walk into a lending institution with 20% down and obtain financing for a home. That person could have been a street sweeper with money in the bank and a decent credit score, and not incur any problems with loan approval. Stated income loans in today’s real estate market are a little harder to come by, if at all.
This type of financing was designed to assist the self employed individual or business owner who had a hard time verifying income based on tax returns. Entrepreneurs and their accountants are always looking for tax shelters and ways to lower income on paper. Therefore, the tax return is not a definitive way to determine income. Consequently, if they have substantial cash to put down, the banks did not consider them as risky as the person with limited income as an employee.
Today many people are asking if these loans still exist. Well they do in some states. Many states have suspended them as a result of stricter guidelines and regulations. California is one state that still offers them in moderation. If a potential borrower walks in with close to 50% down and a credit score of at least 700, they will most likely receive financing.
On the east coast however, lenders are a little more reluctant. New York is full of business owners with large sums of cash, so they are opening the door to stated income home loans a bit slower than before. A large portion of their business was acquired with borrowers of this type, so they must entertain this market segment. A person in the market for this option has to speak with lenders in the state where they plan to purchase beforehand to understand where that state stands with regard to reintroducing the stated income option.
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