Stated income loans have a variety of requirements that differ from standard conventional loans. Because these loans remain on the portfolio of the individual bank, every lender has their own requirements. In general, you need to have excellent credit, at least 12 months of reserves, and a high down payment. Just how high does the down payment need to be? It depends on the factors of your loan.
Good Credit Helps
In order to be considered for a stated income loan, you need good credit, plain and simple. But the higher your credit score is, the more lenient a lender may get with the down payment. Most lenders look not only at your score, but at the payment history over the last 24 months as well. If you have no late housing or installment payments, your down payment requirements would likely be lower than someone that had a late payment or two reporting in the last two years. The down payment is your investment or your “skin in the game”. If you show that you are a low risk for the lender because you make your payments on time, the required investment may be lower.
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Typical Down Payment Requirements
Good credit aside, most lenders require no less than 30 percent down for stated income loans. On a $200,000 loan, this means you have to put down at least $60,000 rather than the $40,000 that would be required on a conventional loan with no private mortgage insurance. It is important to know these down payment requirements up front as it could take you quite a bit of time to save up that kind of money and can help guide you in terms of the price range you shop in when looking for a home. In general, however, the better your credit score and history, the lower the down payment will be required. The more risk you provide the lender with, the more money they will require you to invest.
Keep in mind that the lender is still going to verify your employment with or without verifying your income, which helps to give him reassurance that you are legitimately making the money you state you make and that you prove with your bank statements. If you are self-employed, they can verify that your business exists as well as verify the cash flow on your bank statements. The higher the down payment you pledge to make, however, the more relaxed the lender will get with the risk you pose without verifying your income the standard way.