An Introduction to Stated Income Loans

In pursuing the American dream to own your own home, consumers are constantly searching to find a financing option that best fits them. There are so many options that are now available in financing a home. Options like no money down mortgages, wraparound mortgages, and refinance mortgages. What about the hopeful homeowner that lacks the income to obtain a home mortgage? What about the self-employed whose incomes fluctuates from year to year? There is an option for those that fall into these categories. That option is the stated income loan.

A stated income loan is designed specifically for the self employed, waiters, waitresses, casino workers, etc. If your income fluctuates because of commissions or for any other reason, you are the typecast individual for this type of loan. If you have good credit but lack the documentation to prove your actual income you should immediately look into a stated income mortgage loan. You can easily state your income without having to go through the verification process, however there are some stipulations. Because lenders do not actually check the source if your income, they do ask that you either be self employed or that you be employed at the same job for a period of at least two years. Also, a lender will inquire to make sure that the income is sufficient for the type of position that you have. For example a waiter will most likely not make $250,000 in a year’s time.

As it was mentioned earlier there are some stipulations in applying for and obtaining a stated income loan. First of all – you must have a credit score of at least 600 points, you must have held the same job or been self employed for at least the past two years, and a down payment of at least 5% is required when obtaining a stated income loan. If you have been in bankruptcy or through the foreclosure process in the past, you may still be eligible for a stated income loan. The only requirements are the same as mentioned above with the difference that it must be three years since your bankruptcy and that you have repaired your credit to meet a minimum credit rating of at least 600.

Should you lie about your income? It seems that this would be an easy route to take. There is no documentation needed to prove your income. However, at closing you will be asked to sign a form that allows the lender access to your previous two years tax returns. This does not mean that they will actually check your returns. As a matter of fact it is estimated that only about 10% of lenders will actually verify your income by checking your tax returns. Be warned though, if you are one of the unlucky people who are selected to have their tax returns reviewed you could suffer serious consequences. The results of being caught lying could be as severe as having to pay the loan back in full or selling your home.

To have a smooth and truthful loan process it is suggested that you make readily available your IRS form 1040 for the previous two years. A lender will need your permission to view the form, but it is encouraged, and it acts as a good safeguard in protecting yourself. Stated income loans are a great option if you are self-employed. Getting a mortgage can be a tough process, especially if you have a fluctuating income. If this is you, look no further than a stated income loan.

Can Private Loans Be Turned into Fixed Rate Student Loans?

Fixed rate student loans basically aren’t available. Federal loans come closest, although the law can change. If you want the stability of a fixed interest rate, you will have to consolidate your student loans.

The interest rate on private student loans can change from one day to the next. Federal student loans can only change if federal law changes them, which offers some stability. Private loans should be considered as a last resort, if federal loans and financial aid don’t cover your studying expenses.

Funds offered through federal student loans are not increasing as fast as the costs of completing an education. Private loan providers have found a niche between schooling costs and federal funding limits, offering to cover the difference.

Lenders offer Prime interest rates to students with excellent credit, but young students generally haven’t built up this kind of credit. A student is more likely to have very little credit, no credit, or even bad credit. You will need a cosigner with good credit to get a loan, or barring that, you will have to accept a higher interest rates as well as fees.

Current bankruptcy laws make it nearly impossible to have student loan debt excused. This puts a student in an even more dangerous situation than a sub-prime borrower. Current appellate court precedent denies excusing student loan debts through bankruptcy unless the debtor can demonstrate that their financial situation can never improve.

Consolidating student loan debts does fix the interest rate until the loan is paid off. You can pay a lower monthly amount, but you will have to pay for a longer period of time and the final amount will be considerably higher. A lower payment and the stability of a frozen interest rate, however, can make up for the higher total cost in the end.

Student loan consolidation offers various payment plans, and you can switch payment options depending on your situation. With some lenders, you can pay only the interest for a period, in some cases, of four years, allowing you to start your career without having to pay the principle. Graduated payments allow you to start out paying less and work your way up. If you’re in financial trouble, you can switch to a plan which takes payments based on income. And if your financial situation improves, you can always make early payments.

Consolidation allows you the option of paying fixed rate student loans. It is a debt-management technique which allows you the flexibility to choose the payment plan which is right for you, and the stability of an invariable interest rate.