With so many options in todays financial market it is often hard to know when a certain kind of loan will work for you better then another kind of loan. For the purpose of this article we will be examining whether or not a stated income loan is the right option for you and your goals.
A stated income loan is also known as a “asset-based loan” or even a “portfolio program”, the reason for this is that tax records are usually not investigated by the lender but merely taken at face value by the individual seeking to lend money from the institution. While often times these loans are made available to those who undoubtedly have the funds to repay such a loan despite the tax records, it should be noted that is not unheard of for other to acquire these types of loans.
An example of this is when a real estate investor is applying for yet another loan in order to secure another property. This allows the investor to have several properties in their care while making the loan payment from each of their renters every month. This apparent lack of disposable income would normally raise red flags to any underwriter who was unaware of the situation when the loan was be applied for.
Of course this does not represent a complete lack of required information as most lenders will require proof of employment. Either supplied by you, or they will attempt to contact your employer. In the event you are self employed you will need to give the lender a CPA letter. In addition a lender may ask you to fill out an IRS Form 4506 which authorizes the lender to request verification from your previous tax records in an effort to isolate any risk from the equation.