What Is a Stated Income Home Loan?

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In short, stated income loans allow borrowers to simply state their monthly income on a mortgage application instead of verifying the actual amount by furnishing pay stubs and/or tax returns.

This simplified method was originally intended for self-employed borrowers with complicated tax schedules, but has recently become more widespread, often because borrowers find it that much easier to qualify for a loan by stating their income.

For that reason, stated income loans are also occasionally referred to as “liar’s loans” because it is suspected that many borrowers fudge the numbers in order to qualify for a home loan. Back to that in a minute.

How Does a Stated Income Loan Work?

Well it’s pretty straightforward really, though it does depend on documentation type.

A full documentation loan requires that you verify income with tax returns and/or pay stubs and also verify assets. That’s just listed here for comparison sake; it’s not a stated income loan.

A SIVA loan, or stated income/verified asset loan, allows you to state your monthly gross income on the loan application and requires you to verify your assets by furnishing bank statements or a similar asset document.

A SISA loan, or state income/stated asset loan, allows you to state both your monthly gross income and your assets. So in this case, both items are simply stated, and the bank or lender will not ask you to verify the information.

In all these examples a debt-to-income ratio will still be generated because income figures are provided, even if it isn’t verified.

In cases where a borrower doesn’t even fill in the income box on the loan application, it is referred to as a no doc loan.

Employment Is Still Verified

However, in all of the above cases the bank or lender will verify your employment by calling your employer, or requesting a CPA letter if you are self-employed. This is important because your job title will determine what you can state in the way of income.

If you’re a doctor, it’d be normal to state that you make $50,000 a month. But if you’re a kindergarten teacher, underwriters won’t believe that you’re making $10,000 a month. It’s just not likely, nor does it make sense for the position. And for this reason, many loans that “overstate” income will subsequently be declined.

It’s actually quite common to see a mortgage declined on the basis that the income does not match the job title/description, or seems too high for the related position. And if you’re curious where underwriters determine how much a certain occupation should earn, check out Salary.com. That’s where many are instructed to pull the numbers to see if it adds up.

Another “setback” to a stated income loan is that a bank or lender can ask that you fill out an IRS Form 4506, which basically authorizes the lender to request your tax returns for the previous two years.

Although it’s not common for them to actually look up your returns, it can be enough to deter a would-be “liar” from overstating their income. It’s most common for a lender to pull a 4506 only if you become delinquent on the loan in a short period of time. But if they do pull a 4506 and find that you indeed overstated income, you could be face some steep consequences, so take caution.

Stated Income = Higher Interest Rate

If you do choose to state your income, you must pay a premium because you’re putting more uncertainty and risk in the hands of the lender and subsequent buyer of the loan if sold on the secondary market. For this reason, interest rates on stated income loans are often .25% to .50% higher than a full doc loan.

Related to that, you may also find that you’ll have to put down a larger down payment or sport a higher credit score to obtain the financing you need. Again, this becomes an issue of layered risk, and because you chose to state your income, the lender may limit risk in other departments such as credit and down payment.

In closing, it’s probably safe to say that stated income loans are becoming a lot more restricted because of recent credit tightening worldwide. You may find that the option is becoming less prevalent, forcing many borrowers to provide full documentation or come to the table with a larger down payment.


24 Comments

  1. Michael Beauchamp May 29, 2015 at 3:54 am -

    What lenders are offering SIVA loans? Tennessee

  2. Colin Robertson May 29, 2015 at 9:04 am -

    Michael,

    Look into non-QM loans, many of which allow for stated income.

  3. ROY GREER June 11, 2015 at 7:17 am -

    what is a non-QM loan.

  4. Colin Robertson June 11, 2015 at 3:39 pm -

    Roy,

    A loan that doesn’t fit the Qualified Mortgage standard, one such rule being a max DTI ratio of 43%.

  5. Kathy Smith September 4, 2015 at 5:45 am -

    Are stated income loans available on Conforming loans? I am anticipating a loan amount 350.000-400,000.

  6. Colin Robertson September 8, 2015 at 9:21 am -

    Kathy,

    Possibly, you might want to look for a non-QM loan, which is kind of the new stated income standard.

  7. Kim January 2, 2016 at 8:41 pm -

    Are stated income loans available in Texas, if so, please refer a company to me.

    Thanks.

  8. Colin Robertson January 6, 2016 at 7:46 pm -

    Kim,

    You may want to search for a non-QM lender in Texas.

  9. Erin February 1, 2016 at 3:55 pm -

    I have several income properties I’d like to refinance, for a variety of reasons. Can you tell me if a stated income non-QM mortgage would work for me? I’m in Idaho (so are the properties.). Thanks!

  10. Colin Robertson February 1, 2016 at 4:28 pm -

    Erin,

    There might be a program suited for you…I can’t say with certainty, probably best to do some research on non-QM lenders that lend in Idaho.

  11. Norma April 6, 2016 at 2:16 pm -

    Hi, I am a real estate broker & had switched professions because I had stopped making money doing real estate but now I would like to get back in business (I’ve kept my real estate license). Do you know names of banks in the secondary mortgage market that work through brokers, especially those that do SIVA/SISA loans. None of the other brokers want to share this info & I’ve been gone from this business for few years now. I’ll greatly appreciate your help, you can email me. Thanks in advance.

  12. Colin Robertson April 6, 2016 at 7:40 pm -

    Norma,

    You’d be looking at non-QM lenders nowadays…track those down and you’ll find your stated income stuff.

  13. sean April 25, 2016 at 10:57 pm -

    Can equity be used in a refinance as a down payment?

  14. Colin Robertson April 28, 2016 at 3:10 pm -

    Sean,

    People have been known to use equity from one home to use toward down payment on another.

  15. s g July 12, 2016 at 8:24 am -

    Colin,
    Looking for 150K-165K. I own my house- no present mortgage. House was recently assessed at 1.38 Million. Live in New Jersey. Recently lost my job. My wife and I have a combined income of between 80-90k/year. Other the 12k from SS the remaining income is part time, Ebay selling and hard to doc. I had very good credit – until I applied to 2-3 National Banks for a mortgage. Thoughts? Any companies I could speak with?
    sg

  16. Colin Robertson July 12, 2016 at 10:52 am -

    SG,

    May want to look into asset depletion if income is light, national banks probably not the most informed about programs like that.

  17. s g July 13, 2016 at 6:43 am -

    Can you please explain? Could use some help. Very frustrated.

  18. Colin Robertson July 13, 2016 at 8:12 am -

    SG,

    Research asset depletion…there’s also a chance your wife could apply on her own if she has stable job/income seeing that the loan amount doesn’t seem to be very high. A broker might be helpful to explore the many routes you can take here.

  19. richard August 10, 2016 at 10:57 pm -

    I have a 740 credit score just went into escrow I am trying to buy the house with a 90% stated income loan My gross income for my business I am self employed is $234000 but I take every legal write off I can so my net is low on my tax forms the sales price is $420,000 riverside county ca.I will have $88,000 in the bank when the deal closes but I dont want to put any more money into the deal because I am 69 years old and I feel like I need the security of the cash in bank know of any one who will loan me

  20. angie August 18, 2016 at 12:39 am -

    Hi Colin,
    I am looking for a stated income loan for a home I’d like to purchase.
    I have my own business and can provide corporate and personal bank statements. The loan amount is no more than $750,000 and I would be providing 40-50% downpayment. Do these loans exist with decent rates and amortized over 30 years? If so, do you have any recommendations of companies I could reach out to?
    Thanks

  21. Colin Robertson August 22, 2016 at 8:37 pm -

    Angie,

    With that size of a down payment you should have options…might have to find a portfolio lender or go non-QM route. Do some digging to see what your available options are.

  22. Artoush August 22, 2016 at 9:07 pm -

    I am looking for stated income refinance 900,000 please let me what is the best way to go.thanks

  23. Colin Robertson August 23, 2016 at 7:36 am -

    Artoush,

    You’ll likely need to use a specialty lender that offers portfolio loans or non-qm options.

  24. Robin September 13, 2016 at 10:00 am -

    The article references complicated tax returns. This is misleading as the Borrower is not going to be the one analyzing the returns, it will be the lender. I am in mortgage banking for the last 33 years and I will always fight on the side of not offering the no income verification option on ANY loan regardless of who the investor may be. This is how the foreclosures started to begin with, stretching the rules. If you can’t PROVE your income, you don’t NEED a loan.

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