Stated-Income

Are Your Homeownership Dreams Far from Reality?

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Do you feel frustrated that your homeownership dreams seem to be stuck in a limbo? It feels like no matter how you look at it, owning a house will forever remain a dream.

Buying a house is a huge undertaking. However, it doesn’t mean that you can never be the homeowner you wish to be. To be a homeowner entails a lot of sacrifices. If you’re willing to do whatever it takes to achieve your homeownership goals, you’re one step ahead of those who are just stuck in dreaming.

Planning is crucial when you want to purchase a house. It is okay to be ambitious, but you have set goals that are realistic, achievable and incongruent to your present situation.

When we set unrealistic goals that are way too high for us, we may end up frustrated after trying so hard in achieving it and fail. But when we set achievable and realistic goals, we can work more easily towards realizing these dreams.

Here are some things you must consider when planning for a home purchase. These tips will guide you in setting sensible and achievable homeownership goals.

Ask yourself, “Where am I in my life right now?

Ask yourself this basic question to self-assess your current situation. Will your present life situation allow you to afford a mortgage? Will a foreseeable life event prevent you from making monthly payments should you take a loan today?

We look at homeownership as though only our finances affect it. However, all aspects of our life will have a huge impact on homeownership.

If you are planning to get married soon, for example, will this help or make it harder for you to afford a house? If you’re working as a project-based employee, are you sure that you will still have enough funds after your work contract ends?

Where you are at this moment in your life and what things can happen in the near future will play a huge role in your home buying journey. Make sure that you are really ready to take on this big responsibility.

Come Up with a Realistic Budget

We all have a vision of the perfect house we want to have. However, we may not be able to afford it.

Instead starting your homebuying journey by looking for a property, consider having yourself preapproved of a loan first. This way, you will know how much money a lender will be willing to lend you. This is when you will start searching for a house that fits the budget. If you do this, there is a greater chance that you will be able to afford the monthly payments until you completely repay the loan.

On the other hand, if you start by finding the perfect home and then try to squeeze out every dollar from your pocket just to afford it, you may just exhaust yourself and your finances just to keep up with the payments.

Find the best mortgage rates, click here.

Distinguish Needs from Wants

We all have preferences. However, the essentials should always be on top of the list.

Make a rundown of the house features that you can’t live without and the ones you can let go. Prioritize on looking for a property that has those essential features. the house’s additional features should just be an added bonus.

Perhaps, you’re a home-based professional. Would you really need your own home office or will a multipurpose space work just as fine? Or maybe you really like your home to have a sunroom, but is it worth the price tag?

Know clearly your needs and wants. This dictates the kind of house you should get. Moreover, It will set the property’s price.

Do You have Stable Income?

Income stability is very important for lenders. They need to see solid proof that your income and cash flow are stable enough to afford a mortgage.

Home loans typically require you to be in the same job and with the same employer within the last 30 days, the very least. Hopping from one job to another can be a red flag. But if it’s really necessary for you to find a new one, at least try your best to stay on the same field. Shifting into another field of work not related to the previous one will suggest that you’re most likely to start again from square one.

The FHA, on the other hand, is a good example of a loan that doesn’t require this. There’s no minimum employment period in the same position or employer required. However, the FHA will verify  the most recent two years of your employment. You will have to provide a written explanation for any significant gaps and unusualities in your employment record.

Talk to a lender today, click here.

 

Do you have a stable income but couldn’t qualify for a conventional loan? This can happen to certain people. Some loan applicants may not qualify for a conventional loan due to the lack of some necessary documents to support their income claims.

This is common for self-employed individuals or for those who are earning by commissions. They lack some income verification documents, but this doesn’t mean that they can’t afford a mortgage.The stated income loan can be an option for them. With a stated income loan, a borrower will have to declare their income and the lender will have to take their word for it. You won’t have to undergo the standard income verification process, but the lender will still check for your assets. Of course, you have to be responsible enough to repay the loan completely.

Connect with a state income lender, click here.

 

Final Words

After setting the right expectation and a more realistic goal, it is now time for you to work your way up the homeownership ladder. Start by asking different lenders for the loan rates, down payments and terms.

Shopping for lenders and understanding the available home financing options will help you in finding the perfect program. Once you’ve found the right mortgage loan and the right house to purchase, you are only a few steps away from realizing your homeownership dreams.

Click to See the Latest Mortgage Rates»

Income Matters: How Much Is Required to Qualify for a Mortgage?

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Forget down payment for now. When you plan to get a mortgage, one of the very first things to consider is your ability to repay this debt. That’s why, verification of income on all mortgages, stated income loans included, is an essential step to get approved for the mortgage.

Lenders primarily want to know if you have a steady and reliable income to support your monthly payments. When can a lender say that you are making enough to be able to afford your loan payments? How do you determine this income required for a mortgage?

Find the answer to the question below. Find lenders here, too.

Understanding Income and Mortgage

Stated income loans of yesteryears can attest to this. A decade ago, it was easy to make loans based on the borrower’s word that he/she is earning this much. The stamp of approval did not rely on any verification.

But that’s highly unlikely now. Stricter rules and policies are in place to ensure loans are safe for consumers and lenders. Today’s stated income loans, for example, may forgo tax returns, but alternative documentation like assets and bank statements will be verified.

Income’s importance in mortgage qualification can’t be emphasized enough. And how much you need in order to qualify is a combination of several factors.

Calculating Income Required for Mortgage

To determine the level of income you need to qualify for a mortgage, consider the following:

  1. Monthly housing expenses. This is what you spend on housing, e.g. mortgage payment — principal, interest, property taxes and homeowners insurance (one-twelfth), homeowners association fees — or rent.
  2. Monthly liabilities. This refers to your total monthly expenses, housing and other debt obligations such as car loans, student loans, alimony/child support, and payments on loans that you are a co-borrower to. Utilities are not included.
  3. Mortgage amount. The amount you need to borrow for your home loan.
  4. Mortgage rate. The interest that you’ll receive on your mortgage. If you are getting a fixed-rate mortgage, this won’t change throughout the life of the loan. For an adjustable-rate mortgage, the start rate will adjust periodically. You can get pre-approved to get a definite rate from the lender or shop for mortgage quotes for now here.
  5. Mortgage term. The length of time to pay off the loan. This affects the calculation of your monthly principal and interest payments.

There are online calculators that will crunch the numbers based on those variables.

Knowing Your DTI

Where does your current monthly income fit in all of this?

Lenders use debt-to-income ratio to measure your ability to comfortably take on the loan given your total monthly liabilities including housing costs as noted above and your gross monthly earnings.

To get this DTI, you’ll divide your monthly liabilities by your monthly income before taxes. Your DTI calculation may be different from that of lenders because not all sources of income may be qualified for mortgage purposes.

Nonetheless, your DTI ratio will be your guide in determining your capacity to afford a mortgage for now. Lenders and loan programs have varying standards for DTI ratios. Most recently, Fannie Mae has expanded its maximum allowable DTI ratio to 50%.

Qualifying and verifying income are two different processes and lenders are the best people to ask about their rules. Speak with one today.

Click here to see the latest mortgage rates.

How Real Estate Investors can get Stated Income Loans

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How Real Estate Investors can get Stated Income LoansStated income loans are the perfect solution for many different types of borrowers including self-employed and commission based employees, but the people that they benefit the most are real estate investors. There are several reasons that real estate investors are such a good fit for this program, however, the largest reason is because investment homes are not nearly as regulated as owner occupied properties. This means that investors that take out mortgages have fewer restrictions against them, making it easier to obtain a mortgage.

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Stated Income Loan Requirements for Investment Properties

The basic requirements to meet any loan are necessary for stated income loans for real estate investors, but there are definitely fewer restrictions on this group of people. The requirements include:

  • Large down payment – One of the best ways to reduce the risk that a real estate investment loan gives to lenders is to make a large down payment. Lenders usually require at least 30 percent of the sales price for this type of investment. The larger the down payment that you make, the more you have invested in the home, which means you will be more likely to stay current with your payments to avoid foreclosure of the home and losing your investment.
  • Reserves – Aside from the money you need to put down on the investment home, lenders want you to have reserves on hand so that you can cover the mortgage payment if you were to get into trouble. For example, if you rent out the home and the renters stop paying the rent, the lender needs to know that you have a minimum of 6 months’ worth of the mortgage payments on hand to cover the loan. Every lender has a different requirement regarding the amount of reserves necessary – some accept as little as 3 months while others require at least 12 months
  • Good credit – This goes without saying; the higher your credit score, the more responsible you are with your finances. When it comes to real estate investments, this is crucial. Because lenders are giving you a loan that is not for your own home, they have to ensure that you are really good at balancing your finances to cover everything you have outstanding. It is not unheard of for lenders to require a credit score of at least 700 for investment homes.
  • History of investment homes – Most lenders prefer to see a history of how you handle investment homes. Even if you only have one home to show, it is proof that you can handle the responsibilities that come with renting out a home and managing the finances that go along with it.

How your Income is Verified

Your income can be verified in an alternative way when you are looking for an investment home loan. Lenders usually use your bank statements to verify your income. If you have a history of renting out homes, this is very easy to accomplish. If you are new to investing in homes, you might have to verify your standard employment income before you start using bank statements – every situation will be different. Once you have a history of investing in homes, you can use your bank statements to show the cash flow you receive from your investments and how you manage it.

Banks typically prefer real estate investors for their stated income loans because the income is easy to track and the history of how you handle your finances is simple to verify as well. If you are a real estate investor, consider finding a lender that offers this type of loan so that you can continue on your journey to invest in more homes.

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