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.
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.