It’s very crucial process for interested homebuyers: choosing among the many home loans that would work for them. The application process itself is even as crucial. It goes to show that home buying is no easy task.
For some unique situations, stated income loans are a perfect fit. This type of mortgage does not require traditional documentation like pay stubs or tax returns to verify your income.
But just like any other loan, this comes with upsides and downsides. Weighing the pros and cons before making a decision is always a good idea.
It’s a good option for self-employed borrowers
This is typically a good route for self-employed individuals that are seeking to buy a property of their own. Because of the nature of the activity, finding solid documentation as proof of regular income can be a little tricky. Because stated income loans provide a sense of leniency for those who could not meet the standard documentation requirements for traditional loans, this becomes the next possible choice.
The application process is quick and easy
Coming from their name, stated income loans forgo the fuss that comes with verification and other significant processes that go with the application. When you apply, this loan skips to the part where lenders review and verify your information on your tax returns.
It typically comes with a higher interest rate
Since it basically comes with a stress-free process, stated income loans charge a higher interest rate. And although it still goes by within industry standards, a higher interest rate means a higher monthly mortgage due.
The risks could be higher for you
In connection with it coming with higher rates, borrowers for this loan should be certain they can carry on the monthly financial responsibility. If you make a hasty decision like purchasing a property that is beyond your means, not being able to meet your obligations could lead to having your loan go into default.
In the end, the biggest decision lies in your hands. With both advantages and disadvantages, it can help you come with a well-thought decision.