Stated-Income

Can a Co-Borrower Help you Refinance?

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Have your financial circumstances changed since you bought your home? If your credit score fell or your debt ratio increased, you may find it harder to get a mortgage now than when you bought the home. What if you could get the help of a co-borrower though? Would that help?

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In some cases, a co-borrower can help. Keep reading to find out if finding a good co-borrower can help you.

Did Your Credit Score Fall?

Unfortunately, co-borrowers can’t be much help when it comes to credit scores. Lenders look at the middle credit score of each borrower. They then take the lowest middle score between the two borrowers to use for qualifying purposes. If you have worse credit than your co-borrower, the lender will use your credit score.

Here’s an example:

Your three credit scores are 649, 667, and 692

Your co-borrower’s three credit scores are 684, 691, and 695

Your middle credit score is then 667 and the co-borrower’s middle credit score is 691. The lender will use your score of 667 to qualify you for the loan. This credit score should be good enough for a variety of loan programs, but if you have a credit score much below 640, you may find it harder to find a loan program.

Did your Debt Ratio Increase?

Your debt ratio is the comparison of your debts to your gross monthly income. Each loan program has its own maximum debt ratio requirements, but in general, the total debt ratio shouldn’t exceed 41% – 43%.

If your debt ratio greatly exceeds these amounts, you may need a co-borrower to help bring your debt ratio down. Because your co-borrower goes on the loan, the lender can use his/her income to help you qualify for the loan. Here’s the catch, though. If you use the co-borrower’s income, the lender must also include his/her debts. If your co-borrower has a large amount of debts, adding him/her onto the loan may not help.

If you are lucky enough to have a co-borrower that doesn’t have a lot of debts, though, it can help you get qualified for the loan.

The Difference Between the Co-Borrower and Co-Signer

Don’t confuse the two terms co-borrower and co-signer. A co-borrower is on the loan and the title. He/she has rights to the property. This person is also liable for the mortgage. The co-borrower signs all of the loan documents. The co-borrower has a say in what happens to the property, including selling it.

A co-signer is on the mortgage note, but not on the deed. This means that the co-signer also is not on the title. The co-signer does not have ownership in the property. He/she cannot decide to sell the property or make changes to it. The co-signer is still liable for the mortgage payments should you stop making payments.

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Should you Use a Co-Borrower?

Now the big question is whether you should use a co-borrower. Typically, the best co-borrower is your spouse. You don’t have to worry about ownership issues when you own the home with someone you are married to. Of course, if you get divorced, you’ll have to split the property or work out a settlement with your lawyers, but the law covers you in this situation.

If you aren’t married and you need a co-borrower, you’ll have to choose someone wisely. Buying with a friend, for example, can be risky. You need a lawyer to help draw up the proper agreement for the ownership to ensure that both parties are properly covered should a disagreement regarding ownership occur. If you can qualify for a loan without a co-borrower, you may be in the best position.

Increasing Your Chances of Approval

If you can’t qualify for a refinance on your own, but don’t want a co-borrower, you can try fixing the issues that prevent you from getting approved. For example:

  • Pay your bills on time to help your credit score increase
  • Pay your debts down to increase your credit score and decrease your debt ratio
  • Avoid taking out any new debt to help your credit’s age increase, which helps your credit score
  • Take on a side job or second loan to help decrease your debt ratio

These simple tips can help you maximize your chances of approval without using a co-borrower. If you do need to use a co-borrower, make sure you choose wisely to ensure that you have the best chance at approval.

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Can you Get a Truly No-Cost Refinance?

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You may hear lenders advertise or suggest a no-cost refinance. You probably wonder how that could be possible. What lender would offer a refinance without charging anything? Closing costs can be in the thousands of dollars, so what’s the catch?

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The truth is that there is a catch. You won’t get the loan for ‘free.’ You’ll just pay it in other ways.

What the No-Cost Refinance Means

When a lender offers a no-cost refinance, it means that they will refinance your loan without charging you any closing costs upfront. It doesn’t mean that they won’t charge you for them, though. Typically, they get the payment from the higher interest rate that they charge you.

Let’s say that a lender offers you two options:

  • Option A is for a $200,000 loan at 4.5% with $3,000 in closing costs
  • Option B is for a $200,000 loan at 5% with no closing costs

Do you see the difference? You pay a higher interest rate so that you don’t have to come up with any money at the closing. The lender eats the costs of processing the loan while collecting more interest on your loan than they would have if they charged the closing costs upfront.

What’s in it for the Lender?

You probably wonder why a lender would even consider this option. Don’t they need the money upfront? While they do, they actually make out on the deal if you end up keeping your loan for the entire term. When you pay a higher interest rate, you pay it for the life of the loan.

Let’s say that Option B was for a 30-year term. You would pay $61 more per month with the higher interest rate. That’ doesn’t seem like a lot, but let’s look at it over the life of the loan. $61 per month is $732 per year and $21,960 over the life of the loan.

That means the lender comes out ahead $18,960 by giving you the higher interest rate rather than collecting the closing fees from you.

Now that’s only if you keep the loan for the entire term. That’s the lender’s hope and why they would give you the no-cost refinance.

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Do you Benefit?

You may benefit from the no-cost loan in a couple of ways. First, if you truly don’t have the money to pay for the closing costs now, you may have no choice. If the refinance is vital for you, because it will save you money on your loan each month, it may make sense to do so.

You may also benefit from the no-cost loan if you know you will move in the near future. Let’s say that you know you’ll move in three years, but you want to refinance because you have a high payment right now. If taking the slightly higher interest rate of the no-cost loan still benefits you, take it. This way you save money on your monthly payment and you get away with paying the closing costs.

In our above example, as long as you move before you have the refinanced loan for 4 years, you make out on the deal. Obviously, the earlier that you move and pay off the loan, the more you come out ahead, but the point is that you didn’t have to pay the closing costs on a loan that you knew you would not have for long.

Basically, you need to know where you break-even. When will the extra interest you pay for the no-closing cost loan cover the closing costs? If you will be in the home much longer than that break-even point, paying the closing costs yourself makes more sense. Otherwise, you’ll end up paying excessive interest and not benefiting from the deal. Ask your lender for quotes for both options and then see which way you come out ahead in order to make your decision.

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How Soon Can You Refinance Your Mortgage After Buying a Home?

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If you are obsessed with getting the lowest interest rate on your mortgage, you may find yourself wanting to refinance shortly after buying the home. Is it allowed? Can you do it?

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Technically, you can refinance right after buying the home. Is it the smart thing to do though? It probably isn’t the best idea. In fact, some loan programs have a specific amount of time you must wait to refinance or the lender just wants to see how you handle your current loan before they allow you to refinance.

So how long should you wait to refinance?

FHA Streamline Refinance

If you have a current FHA loan and want to refinance it with the streamline program to get a lower rate, you’ll have to wait at least 210 days. You’ll also have to prove that you made at least six mortgage payments in that time. Some lenders go as far as making you wait 12 months so that they can see your mortgage history. They want to know that you paid your loan on time for 12 months before they write you another loan and let you pay closing costs again.

Other Loans and Refinancing

Most other loans require you to wait at least 12 months before you refinance. It’s not a rule set in stone, but it’s one that many lenders require. Waiting until your homeownership is seasoned at least 12 months can tell a lender a lot about you.

If you made all of your mortgage payments on time, it lets future lenders know that you should be able to afford the new mortgage payment, especially if it is lower than the original payment. This also gives you time to get settled in your home before you have to pay closing costs all over again. Closing costs can be as much as 2% – 5% of your loan amount. That’s a lot of money to cough up shortly after buying your home.

Understanding Your Break-Even Point

Before you refinance, you should determine your break-even point. This is the point that you pay off your closing costs and start reaping the savings of the refinance. If the break-even point is too far in the future, the refinance may not make sense.

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This can help guide you to determine if refinancing is right for you. We know that even just a 0.5% lower interest rate can sound enticing, but it’s not always worth it.

All that you need to figure out your break-even point is the total of your closing costs and the amount you’ll save on your monthly payment. Let’s say your closing costs were $3,000 and you would save $50 per month. Your break-even point would be:

$3,000/$50 = 60 months

This means it would take five years before you would start earning the savings of the refinance. Does this help you put it into perspective? Even though you’ll save $50 a month and that seems good, it’s not as good as you think. Will you even be living in the home in five years? Is it better to wait until rates get lower and you can save more money? This is something you may want to consider.

Do You Have Equity?

Another factor to consider is the amount of equity you have in the home. If you used an FHA, VA, or USDA loan, you probably have little to no equity right off the bat. Even with a conventional loan, you can get by with putting just 5% down. If you refinance too soon, you’ll still be at that same amount of equity, which may not work in your favor.

Lenders offer what’s called risk-based pricing. This means they quote you an interest rate based on your risk of default. A high LTV often creates a high risk of default. Lenders like to know that you have more invested in the home before they will refinance it for you. They want to know that you intend to stay in the home and will do what you can to make your mortgage payments on time.

Refinancing your home after you buy it can be done at almost any time unless you want to use the FHA streamline program. This doesn’t mean that it’s the right choice, though. Look at the big picture to determine if refinancing in less than 12 months after you bought the home makes sense.

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How can you Use a Home Equity Loan?

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A home equity loan has many uses. It is up to the homeowner to decide just what to do with the money. The portion of your home that you “own” is called the equity. You can figure it out based on the current value of your home and the outstanding principal balance of your mortgage. The difference between the two is your equity. Because that money is not liquid; it remains in your home, you need to take out a home equity mortgage in order to tap into the equity. But just how can you use it? There are many different ways.

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Emergency Fund

Many people take out a home equity line of credit, which is a form of a home equity loan. This line of credit is like a bank account into your home equity. You have to qualify for the mortgage based on your credit, income, debt ratio, assets and the value of your home. Once the lender approves you and you close on the loan, the lender provides you with access to the funds, which are usually up to 80% or so of the full value of your home. Most lenders provide a checking account with checks or a debit card that you can use to access the funds.

If you take out the line of credit strictly to have an emergency fund, you can let the funds sit there untouched. You do not make any payments on the money unless you withdraw it. If you take money out with a check or the debit card, you then pay interest on those funds. Typically, this lasts for the first ten years of the loan, called the draw period. Once the draw period is over, you no longer have access to the funds and you must then pay the principal plus the interest back to the lender. It is nice to have that emergency fund available should something unexpected come up with your home or even your personal life.

Eliminate Debts

If you have large amounts of debt hanging over your head and you do not like paying multiple creditors every month, you can use the home equity loan to consolidate the debts. In this case, the lender will not give you access to the funds, but rather pay off your other creditors. You decide with the lender how much of your debt you can afford to include in the home equity mortgage. This will play a factor in your ability to obtain approval as well since it affects your debt ratio. Obviously, the more debts you pay off, the lower your debt ratio becomes, but you also have to figure in the new mortgage payment to determine if your debt ratio fits the mold.

If you end up paying off all of your monthly debts, you just make the one payment to your new home equity lender. The remaining debts get paid off at the closing with the proceeds of the loan. If you are financially responsible, you will keep those revolving debts at a zero balance and focus on paying down the home equity mortgage to fully get out of debt.

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Make Changes to your Home

Perhaps the most common use for a home equity loan is to make home improvements. This could mean many things – you could make necessary repairs, such as replacing a roof or an HVAC system; you could make cosmetic changes that you desire or make major renovations including room additions. The changes you make obviously depend on the amount of equity you have in the home and how much you qualify to receive. Because repairs and or renovations to a home can greatly increase its value, this is often considered the most valuable use of a home equity mortgage as it gives you a return on your investment.

Pay for College

Student loans are expensive and there is no way around it! If you have equity in your home, though, you can tap into that money to pay the costly tuition and room and board. Sometimes it makes more sense for borrowers to tap into the equity of their home than take out the costly student loans. If your household makes too much money to receive any type of financial support from the government, this is usually the best option. Because you get a tax write-off for a portion of the interest you pay on the home equity loan, it can be beneficial for you to go this route rather than taking out traditional student loans.

Starting a New Business

Starting any type of business can be rather costly, making it difficult to get ahead. A home equity loan can help you gain the capital you need to start the process, though. The good news is that with a business, you usually make the money back faster than you would with any other method. This means that you could get the home equity loan paid off faster than you would if you took the money out for another reason, such as debt consolidation or home improvements. As your business takes off, you can have the capital you need to keep going while still paying your mortgage down or off.

How you use a home equity loan is really a personal choice. Most lenders do not question how you will use it unless there are special circumstances to your loan. If you have a good reason, though, such as consolidating debt, it could help you qualify for the loan, especially if you have a high debt ratio. In general, though, you can take out the home equity mortgage in the form of a line of credit and use the funds as you see fit.

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Are Tax Returns Needed to Refinance Your Mortgage?

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You know you have to verify your income in order to refinance your mortgage. Unless, of course, you qualify for the VA streamline or FHA streamline loan. You aren’t required to verify your income if you use a streamline program.

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But just what does it mean to verify your income? Do you need paystubs, W-2s, and tax returns?

There isn’t a straight answer to this question. It depends on the situation. Some borrowers will have to provide their tax returns, while others won’t need to provide them.

Salaried and Hourly Borrowers

Salaried and hourly borrowers typically don’t have to provide their tax returns when refinancing their mortgage. If you make a yearly salary and it stays the same all year, your lender won’t have a need for your tax returns. Your paystubs and W-2s will show the necessary information for the lender to qualify you for the loan.

Hourly employees are also exempt from providing their tax returns. Hourly employees will have to provide their paystubs covering the last 30 days and their W-2s covering the last 2 years. This way the lender can determine a 2-year average of your income. They do this in the event that your hours vary, which would give you varying income. Taking a 2-year average helps the lender account for the highs and lows that your income may experience.

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Borrowers Paid on Commission

If you work on commission and it makes up more than 25% of your income, you will need to provide your tax returns for the last 2 years. Lenders will look at your tax returns to see if you have any unreimbursed employee expenses that they must deduct from your income. They will also look for any deductions that you take that are work-related. Lenders are required to use your adjusted gross income as it is reported on your tax returns. If you claim many deductions, it could affect your ability to secure a mortgage.

Self-Employed Borrowers

Finally, we have self-employed borrowers. These borrowers definitely need to provide the last two years of their tax returns. Just like borrowers paid on commission, lenders need to determine the adjusted gross income of the self-employed borrower.

Because the lender will use your AGI as reported on your tax returns, it works to your benefit to avoid taking too many deductions during the 2 years leading up to your loan application. Even though this will increase your tax liability temporarily, it will also increase your chances of securing a mortgage.

Don’t worry if your lender asks for your tax returns. It’s just another way for them to verify your income. As long as your tax returns are legitimate and they reflect what your paystubs and/or W-2s already show, you are in good hands. The lender will use your tax returns to calculate your gross monthly income, which they then use to determine your debt ratio. This is the lender’s way of determining if you can afford the loan and if you are a high risk of default.

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The Top 4 Times It’s Right to Refinance

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There’s a good and bad time to refinance your home. It’s not always just about the lower rate. There’s a lot more that goes into the decision of refinancing. Keep reading to learn the top three times it makes sense to refinance your mortgage.

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You Can Lower Your Interest Rate

Okay, lowering your interest rate can definitely help, but only if it makes sense to do so. If you can lower your rate at least 1 percentage point, you probably stand to save a significant amount of money each month. But, don’t just focus on the interest rate. You must also consider the closing costs.

What you’ll need is your break-even point. This is the point that you’ll start realizing the savings of refinancing after you pay off the closing costs.

Here’s an example:

You can save $100 per month on your mortgage payment by refinancing. The closing costs will run you $4,000. Your break-even point is:

$4,000/$100 = 40 months

If you know you’ll still be living in the home in 40 months and for a while after that, it pays to refinance. You’ll realize the savings and pay less interest over the life of the loan.

You Can Lower the Term

One of the hardest parts of refinancing is resetting the term. Let’s say, for example, you had a 30-year term initially. You already paid on that loan for five years. Now you want to refinance because you can lower your rate and save money.

If you take another 30-year term, you start right back at square one. However, if you can lower the term, you stand to save. Even if your payment is slightly higher, you will save in the end. This is because you’ll pay interest for a much shorter time.

Let’s say rather than a 30-year term, you were able to afford a 15-year term. You just cut the time you would pay interest in half. If you can’t afford the 15-year, but can afford a 20 or 25-year, you still stand to save a significant amount of money on the loan.

You Can Get Out of an ARM

You might have taken an adjustable rate mortgage because it was more affordable at the time you bought your home. Maybe it allowed you to afford a higher loan amount. But now that it is adjusting, you no longer want it.

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Again, refinancing might leave you with a slightly higher rate and/or payment, but it will be worth it in the end. An ARM is risky. You never know what your rate will be, so it could leave you unable to make your mortgage payment. If you can secure the fixed rate, you lower the risk and possibly lower the amount of interest you pay in the long run.

Your Credit Score Increased

It might seem odd to refinance just because your credit score increased, but if you went from a ‘bad’ credit score to a good one, you are in a good position.

For example, let’s say you had a 600 credit score before and had to get a subprime loan. Now you have a 750 and have a great credit history. You may qualify for a conventional loan now, which could give you a lower interest rate and better terms.

Again, you’ll have to determine your break-even point to make sure it makes sense. Will you be in the home long enough to enjoy the savings? If you plan to move in a couple of years it probably wouldn’t’ make sense. But, if you know you’ll be there for another 10 years or so, the interest savings could be well worth it.

Refinancing is a personal decision and it’s also one you need to make at the right time. Rates increase and decrease often. You’ll need to figure out which rate will suit you the best and give you the greatest savings. Sometimes it’s not about the lower interest rate, but rather the more predictable fixed rate or a shorter term. Figure out what you need and wait until those circumstances happen.

It doesn’t make sense to refinance if you won’t see a benefit, though. Refinancing costs money every time you do it. Even if you take a no-closing cost loan, you pay the costs in the slightly higher interest rate.

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Refinance Woe: How to Deal With a Low Appraisal?

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Refinance Woe- How to Deal With a Low Appraisal?

You are gearing to refinance your stated income loan and getting your home appraised in the process. You are thinking of using the extra value your home has gained to get a higher loan amount. Unfortunately, your home scored low in the appraisal. What to do? Will the lender refuse to make the loan on account of the low appraisal?

Good thing a low appraisal is not a dealbreaker and there are many ways to deal with it.

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LTV and Low Appraisal

Generally speaking, you could refinance up to 80% loan-to-value of your home. LTV is your loan amount divided by your property value.

Suppose you take out a $100,000 loan on your home you valued at $200,000, your LTV will be 50%. The appraiser visited your home, checked its appearance and condition, and submitted to the lender an appraisal report of $180,000. This puts your LTV at 55%, which is quite close to what you expect and places your LTV in a safe zone.

But what if the appraiser values your home at $120,000? Your LTV will then drop to 83%, above the standard ratio. This puts you in an uncertain mortgage situation especially that it could trigger a private mortgage insurance, an expense you could avoid with a low LTV.

Against this backdrop, you can do any of the following:

1. Challenge the appraisal. Get a second appraisal opinion.

2. Push through with refinance and (a) lower the amount you want to borrow at a level that it reaches 80% LTV; or (b) limit the cash amount you’ll be taking out on a cash-out refinance.

3. Back out of the refinance and pend it until such time your house has gained value.

Second Chances With a Second Appraisal?

Submit a formal rebuttal letter to the lender, challenging the home’s stated fair market value. Independent appraisers often employ the sales comparison approach in appraising single-family homes.

Under this method, appraisers identify three or four properties sold within 90 days and located within mile-radius of your property. They will then compare these properties with your home in terms of property condition, age, square acreage, bedroom and bathroom count, etc.

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In your rebuttal letter, you could point out that the appraiser had not selected a sample of comps that truly represent the going prices in your area. Enlist the help of realtors to support this claim.

Another tack for lenders to change their mind is to get a second opinion from another professional appraiser. This second appraiser may be able to spot errors the first appraiser could have done. It’s up to the lender to agree with you or not.

Refinance But Lower Your Loan, Cash-Out

With a low appraisal and higher LTV, your lender won’t naturally approve the loan at the amount you originally sought for.

You can opt to lower the amount you seek to borrow pegged at 80% LTV to avoid any PMI. Settle any remaining loan amount in cash. This is also called cash-in refinance.

Or you can reduce the cash you’d be taking out of your equity. This will keep your loan size smaller.

Save for Equity Now, Refinance Later

If you feel that a refinance now is counterproductive because of the low appraisal turnout, you can always come back when your home has strengthened in value to tap its full potential.

Equity works best when home prices are rising and you’ve substantially paid down your loan.

In canceling the refinance application, you will still pay for the appraisal bill. Even more so when you request for another appraisal, you will pay for two reports.

Consult a lender today.»

Does Adding a Co-Borrower to Your Mortgage Make Sense?

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Does Adding a Co-Borrower to Your Mortgage Make Sense?

The concept of adding a co-borrower is a common practice in the mortgage industry. It’s a practical move to share the costs of holding a mortgage or help you qualify for a bigger loan that you might not be approved on your own. In the initial or later stages of mortgaging, you can put in another name as a borrower to your loan.

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During the Application

When you ask a spouse, a friend or a family member to sign up on a mortgage with you, you are basically “pooling” all your income, assets and credit history together.

With the ability to repay rule in place, lenders are required to do a capacity check requiring traditional or alternative documentation as in the case of stated income loans. In the course of this verification, they might find that your monthly debts relative to your monthly income, as measured by the DTI ratio, is too high. If your co-borrower has a steady income (and that he/she has a lower debt-to-income ratio), it will help you qualify.

Similarly, you and your co-borrower could add your assets such as cash deposits, stocks and bonds to qualify for a loan with a bigger amount perhaps. Lenders check assets to see if these could support your closing costs, fees, and mortgage payments. There is also a reserve requirement that depends on the type of property you are buying.

To be clear, a co-borrower with a stellar credit will help you qualify and possibly get a lower rate only if you have a fairly good credit record yourself. Lenders will consider the lower of the two credit scores and if your score falls further behind, it won’t help in your application.

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During a Refinance

You can refinance to add a co-borrower to the loan. Just like when applying for a new mortgage, you and your co-borrower go through the verification process anew, income, assets and liabilities and credit history be under review.

Adding a co-borrower to an existing mortgage through a refinance is different from adding him/her to the title deed of your house. Except when he/she is related to you by blood or a spouse, a mortgage co-borrower does not have a security interest in the property although he/she has to pay back the loan with you.

Without a Refinance

You can skip refinancing and add a co-borrower to the mortgage but only to a certain extent. For instance, you add someone to the mortgage to put into writing his/her promise to pay some or all of your mortgage debt.

If your purpose is to add a child, spouse or parent, you are better off adding them to the mortgage deed, as mentioned above. They can be co-owners but not co-borrowers so they won’t have to be held equally responsible for repaying the loan.

Otherwise, you still need to refinance so you can add a co-borrower on top of getting a low rate, taking cash out of your home, shorten or extend your loan term, etc.

Be sure to ask your lender about the implications of getting a co-borrower and the options to remove him/her should there be a falling out as in the case of divorce.

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How to Go About Stated Income Refinancing?

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how-to-go-about-stated-income-refinancing

Years after the whole US market plunged into an unprecedented housing crisis, banks and lenders have slowly loosened up on their loan guidelines and products. Today, you can obtain a mortgage without the necessary conventional documents required by a conventional home loan. This opens an opportunity for a lot of potential homebuyers in the self-employed sector.

Applying for a Stated Income Refinance Loan

Fifteen million Americans are self-employed. That is a significant quarter of the population who might find it a problem to get a home loan due to their lack of the necessary income and tax documentation. A stated income loan which only requires the borrower to disclose their income information, is thus a very good alternative for these individuals.

Refinancing a stated income loan requires more or less the same processes as a traditional mortgage. It only differs in the way income is verified. To refinance your stated income loan, you must:

  • Shop around and a find a suitable lender that understands your needs and offers fair interest rates
  • Fill out and submit your mortgage refinance application
  • Provide your personal information
  • Disclose income information including source, amount, as well as length of employment (for employed borrowers)
  • Provide asset information
  • Provide debt information

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The process initiates as soon as your application is submitted and you sign a statement that permits your lender to pull your credit. Although stated income loans are less stringent on their requirements, there are still standards that you need to meet in order to qualify and that is what the lender will look for in your credit data and submitted application.

Submission of Necessary Requirements

After you prequalify and settle with a lender of your choice, you can now proceed with submitting the necessary requirements, namely:

  • Bank statements from the most recent year
  • Your employer’s contact information if you are employed
  • Proof of assets
  • Proof of current debts

Getting Your Property Appraised

The loan-to-value ratio of your property is a major determining factor in getting approved for your stated income refinance. That is why it is required to go over a home appraisal by a professional appraiser. Aside from that, the appraisal will also determine the market value of your home and the necessary improvements that should be done before you can proceed on the sale.

Closing

Once all the required documents are submitted, your property appraised, and your lender has verified all the necessary information, you are now ready to close. When signing closing documents, be sure to read the fine print before you put your signature on the dotted line. During closing, the funds will be distributed accordingly to the right parties.

The different manner of income verification is the only thing that sets the difference between stated income loans and your conventional mortgages. It is not hard, but deciding to take it is a risk both for you and for the lender. For you, because stated income loans have higher interest rates than their traditional counterparts, and for the lender, because they are giving you money based on alternative documents that may not provide full guarantee your ability to repay.

Talk to a financial expert or a lending professional to find out if refinancing is right for you.