Given the recent housing crisis, it is not surprising that many lenders have increased the lending criteria for loans to be approved. It was not uncommon for bad credit borrowers to get sub-prime mortgage approved with no money down. Those days are over. No longer will you be able to get a loan without having the sufficient income or credit rating to support that loan. One loan that has been severely affected by the recent crackdown on lending practices is stated income mortgages.
Stated income mortgage loans used to be the preferred loan for people who owned their own business or worked as a contractor. Just like the name suggests, stated income loans allow you to state your income in the mortgage application. This means that you didn’t need to show proof of W-2s or pay stubs when you were applying for the loan. Home businesses based borrowers could then show tax returns for the past couple of years to show the proof of their income.
Once borrowers began defaulting on their loans in 2007, the stated income mortgage lenders stop issuing loans. Also known as “liar loans,” these stated loans tended to attract people who didn’t have the sufficient income to take out a home loan. Once the economy started to fall, many of the poor credit stated income borrowers began to default on their loans. Unfortunately, the actions of a few wrecked the opportunity for good credit borrowers to get stated income loans approved.
Not until recently have lenders begun to slowly start to implement stated loans again. Lenders who are now offering these loans, do so with different lending standards and criteria for loan approval. No longer do lenders offer stated-income/stated-asset (SISA) loans. If you apply for a stated loan, you also have to show proof of all of your assets as well as any debt that you owe to creditors. Lenders calculate your debt to income ratio to determine whether or not you have the capability to repay the mortgage loan.
Another major change in the way that these stated loans are being issued is the new credit rating requirements. If you have a bad credit rating then you will be rejected for no doc loans. You have to have a good credit rating if you are thinking about applying for a no doc loan. This means you shouldn’t have any late payments within the past couple of years and show a good history of credit. No doc loans are designed to be available for people with a good credit rating that have a difficult time proving their current income.
People who are interest in applying for stated income mortgages, should go online to see the different mortgage lenders that are available. Be sure to do a comprehensive search to find the best stated income mortgage loan lender for you. This means getting different quotes from lenders to ensure that you get the best mortgage rate available.
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