February 28, 2009
Stated Income Credit Lines
People who get most of their income from commissioned sales or own their own business often have a very difficult time being approved for credit. When they go to apply for a mortgage or line of credit, they are met with resistance by the bank, because they can not provide supporting documentation of their annual income. Lenders have recently addressed this problem, by introducing stated income credit products.
If you want to borrow against the equity in your home you may be eligible for a stated income line of credit. The lender will not require you to provide proof of your income, but instead will take your word for it. Then, once approved, they account will be administered like any other.
Small business owners are able to reduce their taxable income by claiming legitimate business expenses. This presents a problem when it comes to qualifying for loans and mortgages as their taxable income often falls below what is required to be approved for additional credit. The stated income lending products resolve this.
The lender does not ask to see pay stubs, W2s or other income documents. What they require instead however is very strong credit. Your credit rating needs to be well above average to offset the additional risk the lender takes by not verifying your income.
Interest rates and fees on stated income loans are often greater than on usual loans. This helps to offset some of the increased risk the lender takes as well. All in all, however they are by no means excessive.
Given that the lenders can’t verify income, they will often endeavor to shore up and verify everything else they can. For example, they sometimes put in place restrictions on the minimum number of years in business or by what percent the new monthly shelter payment can go up by.
So there are options out there if you are self employed for getting home equity lines of credit. Be sure to contact your local mortgage lender and see if they offer stated income products. If not you can search online for one who does are consult with a mortgage broker. Regardless of your choice, just be aware there are options.
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