Stated-Income

How You Can Generate Extra Money Online

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Who doesn’t want additional cash? It’s one way of boosting your finances. With that extra money, there’s more for shopping, dining out and splurging. There are so many things you can do with the extra cash.

But did you know that that additional income can help you get a more attractive home loan?

Yes, with a stated income home loan, the bigger your revenue the better mortgage you get.

Unlike conventional financing, stated-income loans allow you to purchase or refinance a mortgage without the need for income verification. You just state how much money you make and the lender will take your word for it. They’ll only verify your assets and bank statements to see if you have enough to repay the loan.

Extra Money At the End Of Your Fingertips

In this case, you need to grab any opportunity to make more money than you’re currently earning.

Thankfully, there’s this one platform that makes moneymaking a lot easier, and it’s right at your fingertips — the internet.

Nowadays, it is possible to earn big money online. You no longer have to leave the comforts of your home. You can even do your online job during your office breaks.

Whether you do it on your free time or you devout a couple of hours in a day to sit and work on it, it’s completely up to you.

Here’re four creative ways to generate extra money online.

Monetize your Hobbies and Talents

Do you have a hidden talent? Are there things you are passionate about? If you have a myriad of unused skill set, sell it online!

There are numerous freelancing websites for different people with all sorts of talents. From writing articles to voice over stints, you can sell these talents and make a couple of extra bucks.

There are online websites that create a marketplace for freelance moonlighters who have a couple of hours to spare in a week. Your paycheck will vary depending on the skills, experience and time you can offer. This is a great avenue for professionals who refuse to rely on their primary job as their sole source of income.

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Sell Your Photos

If you’re into photography as a hobby, it’s time you turn that into a money-making sideline.

You can upload your photos, illustrations, and video on artwork stock sites. You can become a contributor to such sites and earn money every time someone pays and downloads your creations for them to use.

Don’t let that camera collect dust. Start snapping beautiful shots, upload ’em and see the money roll in.

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Teach Classes Online

Some people who can’t attend classroom lectures opt to take distant-learning courses. Specific websites hire course instructors to teach these people through Skype sessions.

If you have an extensive background in teaching or you have some kind of a specialized skill, you may potentially earn a lot by becoming a course instructor. Online course websites will be willing to pay you good money for your time and service.

If you have the passion for teaching, this can be a thriving and enjoyable part-time job for you.

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Be a Part-time Virtual Secretary

This is one of the most popular online freelancing jobs. There are plenty of clients seeking for virtual assistants who can help them get their day’s task organized.

There are sites where you can sign in and wait for job postings from potential clients. Your rate will vary depending on the type of task and the time you can offer. You may become the virtual secretary of the next Steve Jobs, you’ll never know!

Wrap Up

Adequate income and financial assets open up doors to greater opportunities for housing and personal stability. It’s important in applying a home financing. Homebuyers with adequate funds and stable income sources will most likely get a more favorable mortgage, all other things equal.

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5 Stated Income Loan Facts You Should Know

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Many of us are a lot more familiar with conventional and government-backed loans than stated income loans. Some of us may not know much about it except that it is considered a non-conforming mortgage.

For sure, you’ve come across this term while shopping around for mortgage loan options. Most of us are guilty of shrugging off stated income loans before we even take a little more effort in knowing about it.

But before you make a decision, it is important that we have adequate information about this mortgage loan. Knowing its benefits and drawbacks will help borrowers understand and decide whether or not this loan is right for your situation

Here are the five loan facts you should know about stated income loans:

Each Application is different

In a stated income loan, each applicant submits a “unique” application. No two applications are alike. The mortgage lender will base their underwriting largely on the income you declare and the other documents you can provide.

A stated-income loan can cover many different loan types and underwriting process. However, it is still wise to prepare for the application as shop for different lenders to find a stated income loan with requirements that fits your current situation.

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It has many types

A stated income loan has different types. Each has its own documentation process.

A Stated Income/Verified Asset Loan (SIVA) allows the borrower to declare the gross monthly income. No verification is done to check the veracity of this declared income. However, the lender will verify the homebuyer’s assets. To do this, the borrower will have to provide copies of banks statements and other necessary documents that show these assets.

Another type of stated income loans is the Stated Income/Stated Asset (SISA) Here, the borrower declares both his/her income and assets. These won’t be verified by the lender or the underwriter. However, an estimated debt-to-income ratio will be determined using the income stated on the application.

The Process is Streamlined

This is one of the most obvious advantages of a stated income loan. Because the lender doesn’t require an applicant to submit tons of documents for verification, the loan process is cut short.

If there’s one thing stated income loan can guarantee, this that the application can be quick. This saves you a lot of time. This can be beneficial if you’re in for some steep competition with other homebuyers for the same property.

Connect with a lender, click here.

Today’s Stated Income Loans are Much Safer

The stated income loan of the yesteryears was seen as risky loans because you can get financing without any verification for creditworthiness.

Now, some stated income loan will require some sort of verification. A lender will need to ask you of your tax records or any other papers which shows that you can handle a huge financial responsibility. It will allow lenders to check for any mishandled debts in the past.

They may Costs More than Conventional Loans

Stated income loan falls under the non-QM category. While not all non-QMs are risky loans, it is considered inherent because it doesn’t conform to the QM lending standards. For this reason, stated income loans may have a higher interest rate and a larger down payment than QM loans. They may be more expensive than conforming loans. These compensate for not being able to verify the borrower’s income.

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False Stated Income: Here’s Why You Should Never Overstate Your Income

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Misstating income was pervasive back then, the Great Recession is proof. With lenders required to evaluate a borrower’s ability to repay his/her mortgage, income remains relevant to qualify for a mortgage. This is especially true for stated income loans whose approval primarily hinges on the borrower’s income.

Despite regulations, fraud is still present even in today’s revamped stated income loans. There is the case of false stated income when a borrower “innocently lies” about his/her income to qualify for this kind of mortgage and/or a higher loan amount at that.

Find out why it’s never a good idea to lie about your qualifications that might result in loan denial and how lenders protect themselves from this kind of mortgage fraud.

Find out if you qualify for a loan, too.

Overstating Income Is Always a No-no

According to a Federal Reserve study, U.S. median family income rose 10% between 2013 and 2016.

Generally speaking, mortgage borrowers complete a Uniform Residential Loan Application, specifically Form 65 for those who want to get in the stated income program as per Freddie Mac that purchases mortgages including stated income loans in the secondary market.

Income, employment, and assets are checked in the normal course of making loans. Still, there are instances when some of this self-reported information is not verified.

For instance, Freddie Mac notes that the borrower’s employment or his/her source of income is the only item validated by a lender as it relates to income.

Self-employment income is generally harder to verify in itself because of certain expenses that get written off. But employment income can be overstated using fake Form W2s or by declaring additional sources without proper documentation.

Against this backdrop, it is possible for borrower-reported information, erroneous at that, to go unchecked. While one might be able to get away from lying on the loan application, the act is punishable by law.

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How Lenders Deal With False Stated Income

In Freddie Mac’s best practices combatting false stated income fraud, it recommends that lenders let their most seasoned loan officers handle stated income loans.

The government-sponsored enterprise encourages lenders to compare the borrower’s characteristics, e.g. age, employment position, education and experience vis-a-vis the income declared on his/her application.

Lenders might also have to look into how the borrower accumulated his/her assets. More importantly, how does the stated income loan figure into his/her monthly debt obligations.

If a salaried employee wishes to qualify for a stated income from an additional income source that is not documented, he/she must be able to specify in the application form which parts of his/her income are from this additional source.

A borrower who can’t qualify based on traditional income documentation such as W-2s and paystubs may not be eligible for a stated income loan.

Similarly, a non-qualifying spouse’s income must not be added to the borrower’s income for mortgage qualification purposes.

Lying about your income is risky for you and the lender because you might not be able to repay your loan later on. More than loan denial, you could face legal consequences if caught.

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Why Do You Have to Scrutinize the Affordability of Your Mortgage?

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Magnifying Lens

You got a call informing you that your bank has finally approved your stated income loan application.

Congratulations! You will finally be able to buy a home of your own.

But before you sign on the dotted line, make sure you have checked on one very important thing – the affordability of your mortgage.

Can you afford your mortgage?

Okay, your lender has told you that your debt-to-income ratio qualifies for a mortgage. The question is, can you truly afford the loan in real life?

When the lender reviews your credit, they won’t be able to see the entirety of your spendings. In it, they will only see bills from your credit card or auto loan and even your student loan. However, they won’t be able to check how much you spend on your grocery and gas, your utilities and other insurances.

Your credit may not be the total reflection of the kind of spending habits you have. It is only you who can truly assess if you will be able to make consistent, full and on-time payments. You have to factor in all the things that may affect the affordability of your home loan.

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The law requires that your affordability is determined.

Your lender is responsible for determining your affordability. This is the law. They have to do so with due diligence by scrutinizing your income and debts.

Not only do they want to make sure that you are willing and able to pay their money back. The truth is they have to do this because if they fail to do so, they may be penalized. Before they will even provide the loan, they will ask you to provide all the necessary documents for them to check your income and debts.

While there are loans that do not require any documents for verification, they are deemed too risky. Stated income loans may be non-conventional but it still requires adequate proof of affordability before it can be originated.

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Rules are rules.

Non-qualified loans do not mean not having any rules to follow. One particular guideline is the Ability to Repay Rules.

With these rules, there is a stronger sense of accountability, both on you and on the lenders part. Gone are the days where you just declare to a lender that you can afford the loan and they take your word for it. You have to show adequate proof that you truly can repay the borrowed money. Stated income lenders will set their requirements, establish that a person can afford a home financing and be accountable for it.

Non-qualified loans like a stated income loan do not work like QMs, where you can sue your lender when you are given an unreasonably higher rate or provided with unattractive terms. You have to understand how your loan works. Moreover, you have to establish that the affordability of your mortgage is well within your means.

Begin shopping for lenders. Make sure you are able to make comparisons between offers. This will help you find a loan that is truly within your budget. Make sure you have all the documentation needed.

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Getting a Stated Income Loan? You Should Prepare These Documents

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You’ve probably heard about stated income loans by now. In fact, there are a lot of individuals who are looking into this type of loan. After all, it accommodates those who could not qualify for a conventional loan. But even if this loan exists, there are still some documents or paperwork that comes in handy when you apply for one.

In a nutshell, stated income loans are perfect for those who are either self-employed, small business owners, or retirees. This loan type once lost its popularity after the mortgage crisis took over in 2008.

But things turned out differently this time. There is now a demand for this type of loans again. And together with the rule that requires lenders to make sure their clients have the ability to repay, stated income loans are slowly making a comeback.

And while stated income loans have a more relaxed set of guidelines, lenders still need to see significant documentation that would prove your ability to pay off your mortgage. But unlike conventional loans, borrowers would have to produce a unique set paperwork that stated income lenders would likely require.

CPA Letter

For self-employed borrowers, a CPA letter verifies your self-employment status. This is secured from the borrower’s CPA or tax preparer. This proves the accuracy of your employment status or business information.

The letter contains significant information like the applicant’s name, business name, address, and phone number. The nature of his or her business, the percentage of ownership, and the years that the business has been operating is also included.

Bank Statements

It’s important to secure a record or copy of your bank statements when applying for a stated income loan. Lenders would still need some kind of verification of your assets and a record of your banking activities or transactions can accomplish this.

It’s important to note that you are the one who needs to decide which bank statement to show your lender. For small business owners, choosing to show your business account could make a difference if you don’t own 100% of the business. That’s why it’s important to be particular when making this decision.

Rental History

For both first-time and repeat home buyers, showing your financial responsibility can be done by providing a history of your rental payments for at least the past 12 months. Lenders would usually look into this piece of document to verify that you are responsible enough to take out a mortgage.

This could be obtained directly from your landlord through an official Verification of Rent form or from your bank account. Rental history through your bank account could be shown through canceled checks. This would prove that you pay your rent with the date that your landlord cashed it and that you continually pay it on time.

IRS Form 4506

Some lenders would require an IRS Form 4506. Even if you don’t need to show your tax returns, the form will verify that you responsibly filed your taxes. The income reported on your transcript would not be that important.

When lenders verify this piece of information from you, it protects them by knowing that they can take a chance in providing you a loan even if you could not give a full documentation of your income.

The Bottom Line

In the end, each lender differs from the other. But these documents are some of the most important ones. It’s important to also remember that even if this type of loan has flexible guidelines, lenders would still need proof that you can handle the responsibility of carrying a loan.

And since these guidelines are generally achievable, it’s understandable that stated income loans would still have a unique and careful qualifying process since it can carry more risks than most standard loans. That’s why it’s important that, as a borrower, you do your end of the preparation and show your lender that they can trust you.

The Ups and Downs Of Stated Income Loans

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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.

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Advantages

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.

Disadvantages

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.

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A Liar’s Loan is Not Something to be Scared Of

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The term liar’s loan came about when some borrowers came up with falsified information when they were applying for a loan. But even some lenders were untruthful when offering the loan to borrowers. Back then, some loan products opened doors for unethical practices for borrowers and lenders. However, the nature of these loans remain true; to help those who cannot qualify for conventional loans get an alternative financing. Sad to say, some people abused this opportunity and exploited it too much.

No-documentation loans and low-documentation mortgage loans are basically that. Borrowers may qualify for a mortgage loan without having to submit all the standard documents a conventional loan requires. A stated income loan is a good example of this loan type. The borrower simply states his/her income and the lender will take the person’s word for it.

Call it a liar’s loan, but you don’t have to lie to get financing.

The convenience and leniency these loan products offer made it easy for unscrupulous people to abuse. this became rampant until the term “liar’s loan” was coined for such loans. Nonetheless, a no-doc or low-doc loan as created more opportunities for certain people.

Individuals who cannot produce income and asset verifying documents turn to stated-income loans to find financing. These borrowers may have non-traditional incomes sources or have a personal business or are self-employed. Even so, this does not necessarily mean they do not have the money to afford the monthly payments.

Qualifying for a stated income loan is pretty straight forward. The lender will allow you to state your monthly gross income and your assets. The lender, may it be a bank or a private lending company, will not ask you to verify this information by asking you for documents.

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What is verified?

Not having your income verified doesn’t necessarily mean nothing else will be. If you have a job or you work for somebody, the lender may contact your employer to verify your employment. If you are self-employed your lender may verify this by asking you to submit a CPA letter.

Loans like these will care a much higher interest rate than a full documentation loan. It may also ask you to put a larger down payment or will require a higher credit score. This is done to lower the level of risk the borrower has. For lenders, not being able to verify your income poses a great uncertainty on their part.

Per contra, if your situation has made it impossible for you get other loans, a stated income loan may help. You can start shopping for lenders. Knowing the loan offers from different lenders will give you more options to choose from.

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Are There Lenders Offering Stated Income Construction Loans?

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Are There Lenders Offering Stated Income Construction Loans?

Finding a construction loan while self-employed can be a bit more difficult than when you have a stable job with a stable monthly salary. When you are just starting up in business, it can even be harder since you will have less income history to show to your lender. Still, finding a construction loan to fund your home building needs while in such a situation is not unheard of. Stated income construction loans offer such financing programs with a different set of qualification standards. Let’s look into this option.

Who is eligible?

Stated income loans, in general, are designed to cater to the financing needs of individuals who find it hard to get loans from conventional lenders because of complications in their income. These include those who are self-employed, have seasonal jobs, or those who receive commissions.

Differences in income or too many write-offs in your tax returns can be red flags for conventional lenders. Instead, with a stated income loan, alternative documentation is used to verify your income.

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Finding the right lender

Stated income loans are typically offered by local lenders and banking institutions. Stated income lenders lay low after the legislative restriction post-crisis in 2008 but today, many lenders are re-exploring these options to tap into the remaining chunk of borrower market who place demand yet cannot be accommodated because of the said restrictions.

Still, you, as a borrower also need to exercise caution in finding the right people to work with.

Make sure you are in good shape before you apply. The following can help you prepare right for your stated income construction loan application.

  • Raise your credit. See to it that your credit history and record reflect no delinquencies and are at FICO 620 or above
  • Prepare your bank statements from the past two years
  • Prepare a good down payment amount

Before you apply, inquire first. Remember that an inquiry on your credit report can negatively affect your score. Get as much information as you can about the loan offer and do a comparison. Then narrow down your list and choose the best offer that fits your needs.

Although it is indeed hard to find stated income lenders that offer this type of loan, it is not enough reason to just jump at the first one that gives you an offer. Consider reputation and track record. Find a lender who will also protect your interest and not just their business.

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Is Now the Time for Stated Income Loans?

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Is Now the Time for Stated Income Loans?

The higher mortgage rates, coupled with a tighter lending environment courtesy of Dodd-Frank, seem to act as a backdrop for stated income loans to stage a full comeback. Consumers may have been hoping for more variety in mortgages with less stringent guidelines. Liar loans, low doc loans, however they were called back then, stated income loans have quietly returned and served that purpose for a niche group of borrowers.

What’s in a stated income loan for you?»

Less Risky Stated Income Loans

Pre-mortgage crisis stated income loans lived up to their name. Borrowers state (overstate) their income and lenders skip the verification part. Nowadays, the lender has to verify the employment and assets of a stated income borrower.

One lender, for example, will review the pay stubs and tax returns for salaried employees and business and personal tax returns for the self-employed. Similar to stated income loans, bank statement loans usually require a year’s worth of bank account transactions to see if the borrower is generating positive cash flows.

These measures serve to lessen risky lending practices. For the lenders, they have to make legal representations about the loan and could face a lawsuit if they have not done the appropriate due diligence.

Lenders also have more advanced automated systems to help them underwrite loans, checking if the loan application makes sense and complies with existing regulations.

A Return to ARMs?

The problem of the past stated income loans was their features that only added risks to an overstated income. Most of them had variable rates, which would be difficult to grasp with their caps, limits, margin, etc.

Some stated income loans were option ARMs under which the borrower can pick how he/she will pay back the loan in interest-only payments, minimum payments, 30- or 40-year amortizing payments, or 15-year amortizing payments.

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The first four options called for really low monthly payments so less equity was built into the loan at the onset. Some of these loans didn’t even have down payments. This negative equity and falling home prices led to widespread foreclosures.

Stated income loans nowadays are still offered in variable rates but they also come in fixed rates. Fixed-rate mortgages offer stability and are easier to manage.

Interestingly, the current state of mortgage rates has made ARMs appealing because they offer lower rates than FRMs. They start with fixed rates until they adjust once a year. They’ve been an option for those who plan to move out or sell the home once the fixed rate period is over.

Stated Income Loans Serve a Niche

The Dodd-Frank Act ensures that the subprime mortgage crisis won’t happen again. But it has made access to mortgage credit even tighter for those who have trouble verifying their true income. These same people often apply for bigger loans.

Thus, the self-employed and the affluent turn to stated income loans as a specialized loan product for them. Alternative documents may be presented for employment verification; but higher down payments, better credit scores, and lower DTI ratios are required for stated income loans.

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Understanding the Debt-to-Income Ratio

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Understanding the Debt-to-Income Ratio

You may have heard of lenders offering jumbo loans for borrowers with 55% DTI. DTI stands for debt-to-income ratio, a loan metric as important as your credit score. For stated income loans, the DTI might not figure out that much compared to the size of the down payment and cash reserve and the level of the credit score. Nevertheless, it shows how much you owe relative to how much you earn and could cause lenders concern about your ability to repay your mortgage.

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Two Types of Debt-to-Income Ratio

There are two ways lenders look at and compute your debt-to-income ratio.

1. Front-end ratio. This calculates how much of your gross income, expressed in percentage, goes to housing. Thus known as the housing ratio, it takes into account the monthly payments on any mortgage (first and second), property taxes, homeowner’s insurance, mortgage insurance, and homeowners’ association fees, as applicable. Utilities are not included.

To calculate, divide the gross housing costs by the gross income, multiply by 100. Say your housing-related expenses total $4,000 and your monthly income is $10,000, your front-end DTI is 40%.

2. Back-end ratio. Also known as the total debt-to-income ratio because it sums up the housing expenses; all debts requiring monthly payments, including car loans, student loans, credit cards, mortgages on other properties and related taxes, insurance and HOA fees; child support; alimony; and more.

For example, your housing expenses plus your other monthly debts add up to $5,500. Divide this by $10,000 and multiply 100 and you’ll get a total DTI of 55%.

What Is (Not) Considered Debt?

For a more accurate DTI, it must take into account all the monthly payments you make. The following obligations are not considered debt and are thus not subtracted from your gross income as listed by the CFPB:

  1. Automatic deductions to savings accounts
  2. Child care
  3. Commuting costs
  4. Federal, state and local taxes
  5. FICA (Federal Insurance Contributions Act) or other retirement contributions, e.g. 401(k) accounts
  6. Open accounts with zero balances
  7. Union dues
  8. Voluntary deductions

Lenders and loan programs will still vary on calculating qualifying ratios for a mortgage. Always ask lenders. You can find them here.»

DTI for Stated Income Loans

There is no set maximum DTI ratio for stated income loans. It’s possible to have a DTI ratio of the total monthly income to the total monthly debt beyond 43%, all things considered.

Back in the days when the original stated income loans were all the rage, lenders were more strict with DTI. It’s because the income stated on the loan must have a DTI whose numbers add up.

There’s also the issue of the income matching the job description of the borrower. As in the case now, if your stated income is too high for your position, the lender may deny your loan application or ask for further documentation, making it a full doc loan.

Needless to say, your DTI should match your stated income.

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