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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Is it Possible to Get a Stated Income Loan for Investment Properties?

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Most banks are happy to finance investment properties for borrowers who have less than four mortgages under their name. Unfortunately, they frown on applicants who have problematic credit history, short employment history, have more than four investment properties in their portfolio, or those who have unconventional sources of income. Can the stated income option come to the rescue?

Stated income loans have their roots even before the housing crisis. In fact, they used to be very common, despite the high risk they carry. The accumulation of these non qualified loans led to the housing collapse in 2008, leading lenders and borrowers alike to shy away from such offers. However, they didn’t disappear altogether.

How do you get a stated income loan?

In the years that followed, stated income loan offerings shrunk but as the years erased the trauma of the previous crisis and more demand kept coming in, lenders began to see the profit potential in the underserved borrower market. Today, such loans are making a comeback. Are they safe? Experts suggest that these loans aren’t the same as their predecessors because of more stringent underwriting standards. Stated income loans today may be harder to qualify than their their subprime counterparts pre-recession.

If you get turned down by big banks on your investment property financing application, you can look to lenders such as:

  • Local Portfolio Lenders. These lenders lend their own money and don’t sell their loans to the secondary market.
  • Hard Money Lenders. They specialize in providing loans for fix and flips or rental properties for a short period of time.
  • National Lenders. These lenders specialize in financing rental properties.

Why is it hard to get a loan on investment properties?

After the 2008 recession, the government established rules that required strict underwriting requirements to make sure the borrower can repay the loan. This wasn’t the case before the crisis. Lenders used to provide loans even without verifying a borrower’s income.

This made it difficult for many borrowers who have the money but can’t establish the proper proof that they can, indeed, pay for the loan. Most of these borrowers have huge debt-to-income ratios due to the huge amount of credit on their name. Many of these investors also take huge deductions on their taxes. If your taxable income is too low, you’ll have poor chances of getting a loan. And even if the borrower does manage to get a loan, there’s another set of barriers to refinancing.

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What other benefits can I get from getting a mortgage under alternative lenders?

Most local portfolio lenders do not care if your properties are under your name or an LLC. Most banks require a property to be under the investor’s name which can pose a problem if he or she is trying to limit liability. A strategy that most investors follow is to transfer their properties to an LLC when they finance with a bank later. Unfortunately, the banks can call the loan due when the property is sold and transferring the property to an LLC is basically selling it. This complication is avoided with certain stated income lenders.

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How to Manage Your Finances If You Have Fluctuating Income

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Budgetting

How do you structure your budget if your income is unpredictable?

Internet-ready mobile devices have allowed many of the jobs traditionally held in office cubicles to be done on the go. Jobs like web development, content marketing, teaching, and research and language services are now easily outsourced to different talents across the globe.

The ease of working on your own time, at your own pace has appealed to many, as statistics on freelancing show. Today, freelancers make up 35 percent of the US labor force, collectively earning a staggering trillion in just the past year.

How is this work status affecting a freelancer’s financial stability?

While the margin for earnings is huge in a work with no predefined figures, most budget models rely on a fixed regular income stream.

So how do you, as a freelancer, handle a tricky financial position with fluctuating income?

While this setup can indeed be challenging, properly managing one’s finances is certainly doable. Here are some tips you can follow:

Determine Your Variables

What is X and how does it change depending on Y?

First things first, determine your average monthly income. A good way to do this is to sum up and get the median income from your last 12 months of work. If you think the resulting figure is biased due to a few months of very high payments, you can instead opt to select the lowest income earned in the year and use it as your base.

Now, you have an estimated monthly income.

Step two is tracking down your expenses month per month and determining which ones are necessities and which ones can be cut back or eliminated from the picture entirely.

These priorities may include your mortgage payments, your food allowance, transportation, insurance, health, and family expenses. You also have to factor in annual expenses such as tax payments so by the end of the tax year, you don’t have to come up with a lump sum and defy your budgeting entirely just to make way for a big one-time obligation.

Before building your priority expenses into your monthly budget, you must first earn some level of income regularity, especially if you’ve always had a fluctuating income. If this is your first time freelancing and getting variable salary every month, it’s wise to pay off your debts first than integrating them into your monthly budget head-on. The goal is to have the least recurring expense so you can maximize your earnings.

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Build Your Buffers

Since work and income are flexible factors, there is a real possibility that you may end up cash-strapped on certain months when earnings fail to meet your expense priorities.

To prevent the nightmare of having nowhere to turn to when your finances get tight, a good plan B is to establish buffers.

First, you need to have one ready to cover for income gaps on certain months. You should not look at this fund as another form of income. It should only cover the minimal gaps that you need to meet your budget.

On the other hand, you also need to set up an emergency fund. This would cover emergency medical expenses, household repair, unexpected travel expenses, etc.

It is important that you keep these buffers separate.

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Save, save, save

Given that you are betting against certainty, it becomes more and more important for any freelancer or small-time entrepreneur to build up a strong savings account. Start early. Set your goals and make sure you stick to them. Make your savings contribution a significant element of your monthly budget structure. Some financial experts would even tell you to take out the savings part of your income first before you break it down to the expenses. Still, be realistic. What’s more important is keeping it consistent.

Organize

Organize to the point of certainty. It’s the one thing that could balance out the uncertain element of your job or business. If possible, make a separate account where you receive your income and a separate one for your monthly budget. When income is high, don’t take advantage of the extra dollars. Use it to boost your savings or your retirement accounts. You may also use it to max your buffers and achieve peace of mind knowing that you are adequately covered when the need arises.

Discipline is key when it comes to achieving financial health, regardless of whether you receive a steady amount of salary or not.

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What are the Pros and Cons of Stated Income Loans

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What are the benefits and disadvantages of opting for a stated income loan over a traditional financing option?

 

Most loan and mortgage programs require the borrower to undergo a tedious underwriting process.

These often come with strict lending requirements such as an asset and income verification process which lengthens the loan acquisition timeline (given the lender uses traditional lending tools).

It also leaves out borrowers who earn from unconventional income sources and have a difficult time documenting their salaries.

This is the very same problem faced by self-employed individuals, those who have very high earnings, or those who make money seasonally.

For this reason, stated income loans remain attractive as an alternative financing option for many. It offers a streamlined loan process and saves borrowers the hassle of getting the necessary documentations for the process.

But there’s more to stated income loans than offering fast money. Like any other loan option, there are also setbacks and risks that borrowers would have to consider when looking to get a stated income loan.

Let’s get to the details.

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Why get a stated income loan?

Bypasses the regular job dilemma. The problem with most traditional loans is that they expect all their borrowers to have regular incomes which is just not the case for a significant number of the borrower market.

Paystubs have become the standard basis for evaluating risk so if you’re a freelancer or a businessman, you’re in trouble. For these people, documenting a regular income is not an option. Failure to do so can make you appear as a huge risk to their investments and therefore deny your application.

Not fair. If you’re among the nontraditional income earners in the demographic, a stated income loan which only requires you to disclose your earnings suddenly becomes handy. No need to convince anyone.

You decide your own risk. While traditional loans leave the risk evaluation to banks and lenders who ask: “Can he or she afford it?” borrowers of stated income loans are left to ask for themselves “Can I afford it?” and decide the financing path from there.

You have no need to worry about your DTI ratio being too high or your utilization ratio going overboard.

Fast transactions. Because traditional underwriting process is skipped in stated income loans, stated income loans are generally faster. It’s especially helpful if you are in immediate need of finances.

What are the disadvantages of stated income loans?

High interest. To compensate for the huge risk that your lenders are taking to offer stated income loans, they charge an interest rate higher than traditional loan programs. Remember that a single point difference in interest can sum up to thousands worth of interest payments throughout the life of the loan.

If you don’t need financing so urgently, talk to your lender and see if you can agree to find another way to document your income without resorting to a higher interest loan option.

High potential for default. Traditional loan qualification standards are designed to assess a borrower’s creditworthiness. With a stated income loan, all that safety mechanism is bypassed, thereby leaving you and the lender vulnerable to the real risk at hand.

In some other cases, a real assessment of risk is the only barrier stopping an irresponsible borrower from damaging his or her finances further or from abusing financing programs.

If you are in doubt of your own capacity to measure your own risk, consult a financing professional who can help you crack the numbers and make an informed decision about whether to go ahead or pass financing for now.

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RSA Funding Now Offers Stated Income Commercial Financing

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Investors

Nationwide commercial mortgage banker RSA funding now offers a state income commercial financing option through its wholesale channel.

Underwriting can be pretty tough on self-employed borrowers and property investors due to their income or debt-to-income ratio issues.

Inconsistent income streams that are pretty hard to document or a broad credit portfolio can make banks wary of the risk presented by these types of borrowers.

As a result, most of them are turned down by banks and other private lenders, leaving a significant part of the borrower market underserved.

Commercial mortgage banker RSA Funding realized this issue and saw that something needs to be done to meet the needs of individuals who, despite their non-traditional qualifications, are still creditworthy.

And indeed, RSA delivered, as it just recently rolled out a new product through its wholesale channel called the stated income commercial financing option.

Get today’s stated income loan interest rates!

 

A significant addition

Adding to its roster of loan products, RSA Funding’s stated income commercial financing option:

  1. Offers financing for one-to four-family non-owner occupied properties
  2. A loan-to-value ratio of up to 80 percent may be allowed depending on the type of property being financed
  3. The minimum loan amount is $100,000
  4. Interest rates start at 8 percent
  5. Loans close within two to three weeks in average

About RSA Funding

A nationwide commercial mortgage broker, RSA Funding specializes in placing commercial mortgage borrowers in loans through its wholesale lending channels. RSA Funding brokers many different loan types such as Stated Income, Multi-Family, SBA, Bridge and Bankable Loans.

Not just commercial

Stated income loans are not limited to the commercial market. Many lenders also offer stated income loans for individuals who cannot present traditional income documentations such as W2 forms or tax records. Instead, lenders simply ask the borrowers to state their income and they take their word for it.

But it’s not actually that easy. Lenders who give out stated income loans these days still require their borrowers to have good credit, lots of cash reserves, and even high down payments.

Your employment and/or investments are verified, and you need to show your bank records and statements to prove that you have money.

Because this mortgage product is usually considered risky, borrowers are usually charged with higher interest rates than conventional, conforming loans.

Most stated income loans are based on the equity position of the property. That means that the more the borrower puts down into the property, the easier it will be for him or her to get a loan approval.

Stated income loans are preferable for people who don’t want to pass on certain investment properties but had their cash already intended for some other purpose.

Some investors, who although have the reserves to purchase the property in cash, still choose to use a stated income loan because they want to keep a portion of their money for other investments.

Rules on investment mortgages

New laws established in 2014 made it hard for lenders to approve loans without determining a borrower’s ability to repay. However, most investment mortgages became exempted to the rule since they are considered business loans.

The Dodd-Frank Act of 2010 also made it illegal for lenders to offer stated income loans.

Now, almost a decade after the financial crisis of 2008, many lenders are starting to relax on their guidelines and qualifications. But can these loans be considered the new subprime?

Hardly so, as being lax in one area of qualification is also compensated with some other requirement (e.g. only stated income but a requirement of about 40 percent in down payment or more, etc.).

If you’re a self-employed individual or investor looking for investment financing, programs such as that offered by RSA is worth exploring.

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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.

What is Considered Income by Mortgage Companies

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Income verification is a vital part of the mortgage process, or any loan process, that is. It is necessary to help lenders mitigate risk and determine which applicants have the financial means and capacity to pay for the money they will owe.

Lenders are as diverse as their income and eligibility requirements. What one considers as “income” may not be for another lender. There are various parameters that lenders look for in an income. Let’s take a closer look at these.

Salary

The most common type of income is salary for employed borrowers. You either receive your salary on a weekly, bi-monthly, or monthly basis, at a predetermined amount. Depending on how often you receive payment, the lenders will require you to submit a copy of your pay stubs for at least the past two months. The lender will use your pay stubs to calculate your gross annual income, on top of evaluating your credit report and your DTI or debt-to-income ratio.

Bonuses and Commission

Unlike salary that is fixed in amount, bonuses and commission can also be considered as income by some lenders despite its inconsistent nature. However, it will only qualify if you are able to demonstrate that you have been receiving this form for income for at least two years – and will continue to do so in the future. Because they are not fixed, these numbers will be annualized, meaning the lender will average the amount you receive in a certain period of years and not take the numbers you get per year individually.

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Self-Employment Income

In case of the self-employed, you can use tax returns in place of the pay stubs for income verification. If you are planning to get a mortgage and are currently self-employed, you might want to suspend writing off too many expenses so your tax records will be more reflective of your income. For stated income loans, you can also use bank statements to qualify.

Social Security and Disability Income

An award letter will be warranted by the lender as proof that you are indeed receiving social security and disability fund from the government. You must also be able to prove its receipt through bank statements for 12 months. This will show the lender how much money you are receiving which can then be counted by the lender as income. However, additional documentation must be given to show that you will be receiving said form of income for at least the next three years. This assures the lender the continuity of monetary receipt from which the borrower can get the money to repay the mortgage.

Child Support and Alimony

If you think your income is not sufficient to qualify for a mortgage, you can use your child support and alimony as an additional source of income. To utilize this, you must submit: a) a court-ordered divorce decree or child custody agreement b) bank statements showing receipt of said funds c) proof of how long you will be receiving the income. Like the social security and disability income, you must be able to demonstrate that the income will continue for at least the next three years, which might not be the case if your child is already 17 at the time of application.

What is okay for one lender may not be for the other. However, they are not usually far off. What is universally considered by these lenders are the longevity and consistency of your income. That is why the more consistent your earnings are, and the longer you’ve had the job, the better. But that does not mean it’s impossible to get approved otherwise. Take time to shop around and inquire to find the right match for you.

How to Go About Stated Income Refinancing?

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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

Find a lender that matches your financing needs.

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.

4 Stated Income Loan Facts You Need to Be Aware Of

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It’s easy to see why a stated income loan appeals to someone who is self-employed. A lender offering this won’t be after your W-2 statements or paystubs. He’ll look at the income on your application form without question. Well, most of the time anyway.

In the real world, a stated income loan is not as straightforward as most people make it out to be. If this is an option you’ve been considering, best orient yourself with a few facts.

1. A stated income loan has different versions.

The term ‘stated income’ is often used in the most general terms, like the ‘no doc’ loan. However, this financial product can be packaged differently, depending on the borrower’s circumstances. A lender may offer two different proposals to individuals who technically qualify for a stated income loan.

»Alternative loan options for the self-employed borrower.»

2. Lenders may not always take your word for it.

Your lender may accept the income you’ve written down on the form, but this doesn’t guarantee that you’ll get the loan. Your application may be subject for review so you still need to be ready with documents that show just how much you make.

3. It could cost you more.

Banks and private lenders offering stated income loan programs often deal with borrowers who have substantial credit and significant equity on their current home. Even so, the lender is still at risk because such applications do not require full documentation. Financial institutions will pass on that risk to the borrower, in the form of a higher interest rate.

4. A stated income loan saves you time. But do you really need to save such time?

Borrowers benefit from a shorter processing time with this loan because verification is (mostly) eliminated. Still, you should consider if this will be helpful to you at all. Neither you nor the buyer is likely to want the settlement concluded next week since you’ll both need time to prepare for the move.

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Why Stated Income Loans Appeal to Investors and Big Earners

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There’s this popular notion that loans are a means for most people to afford something. Individually, they lack the financial capacity to pay for a ‘big ticket’ purchase in cash. For instance, a member of the working class doesn’t make millions in a year so he has to get a mortgage to buy that first house. Now, this might have been true in a decade ago. Today, there is a loan product that appeals to the really well-to-do. Introducing stated income loans, a unique way for the rich to expand or maintain wealth.

What Draws Big Earners to Stated Income Loans?

Most loan products out there require the borrower to provide detailed documentation of his/her income sources. A stated income loan is not as exacting. This feature appeals to big earners who either have trouble keeping track of their various income pools or would rather not disclose how much they actually make. The fact that this loan type does not require written verification of income and tax returns gives them a sense of security.
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Apart from having lesser restrictions, the guidelines of a stated income loan are more easily met by those in the upper classes. Without the need for extensive documentation, lenders need another way to reduce a borrower’s risk of default. The solution is to require excellent credit scores, plenty of cash reserves and a down payment that ranges from 35 to 50 percent. The average borrower, still in the process of clearing credit card debt, is not a candidate for this.

Finally, big earners and high profile investors aren’t looking for a 30-year loan term. They want something they can pay off in a short span of time. A tech mogul from Silicon Valley doesn’t want to pay for his new mansion in cash. He could use this particular loan to retain a portion of his own capital and use it for other investments.

The Options

Lenders are packaging stated income loans in a variety of ways to better serve the needs of a wealthy clientele. Some companies offer jumbo mortgages for borrowers with a 55 percent DTI. Others allow interest-only payments. These plans are especially attractive to high earners. Normally, they get the bulk of their income from those company bonuses or commissions handed out yearly or every quarter.This arrangement allows borrowers to make larger payments when they have more money. The rest of time they can make do with minimum payments.
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