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A few years ago, a loan officer who worked for me was having a problem helping a customer. He was new to the business and had very little patience for problems (as you might have already guessed, he didn’t last very long). He told me the customer was a doctor, who had left a hospital job to open his own practice. He was trying to refinance a $300,000 home, but he could not show any current income. After the loan officer and I discussed the options, he walked away from the loan, completely frustrated. So, I asked him if I could work on it. He agreed, saying he didn’t wanted to be bothered with it any longer. So, I did what all good mortgage professionals do, and I picked up the telephone and began calling lenders and telling them the problems with the customer.
After a couple of hours of examining the gentleman’s loan papers and talking to him and several lender representatives, I found the solution – a Stated Income program. You see, this customer, in most conventional bankers’ eyes was not “bankable,” because he really did not have any income. He would have plenty of income in a few short months, but banks don’t loan on what you may have. Wholesale mortgage lenders are different. When I reached the branch manager of one of top lenders in the country, I explained the situation to him. Most importantly, I told him that my customer had nearly perfect credit, and he could show 18 straight months of W-2 income of well over $200,000. Furthermore, he had plenty of equity in his house and maintained over $100,000 in liquid assets (stocks, bonds and savings).
“This is no problem,” the branch manager said. “Simply write the amount he needs to make on the application. With everything else this guy has going for him, I’ll sign off on this loan tomorrow.” And that was all there was to it – we just had to put the right numbers on the paper. Once again, you need a mortgage professional for this special program. Not many banks offer stated programs. Many people who need stated programs get turned down by not only banks but by inexperienced mortgage brokers who don’t understand the breadth of the programs at their fingertips. So, you may have to enlighten them with your own insight by telling them this is the program you need.
Stated programs are for people who may not qualify for a conventional loan, because they do not meet income requirements a lender has, like the gentleman in the previous example. Another example is someone who does not show all of her income on a W-2 tax return, for one reason or another. This person may make enough money to cover the mortgage payment, but she can’t prove she makes it on paper. Lenders like to see two years of W-2 income. This proves to them that you consistently make enough money to pay back the loan. Now, it’s important to note that this is a good credit program, and a lender will want someone with at least A-minus credit for approval.
All the loan requires is all standard documents, except income verification. In other words, the loan officer is going to state your income on the application, and no proof is required. Please note that this program is not intended for someone who works at McDonalds to try to state that he makes $200,000 yearly, so he can get approved for a $400,000 loan. It is intended for people, like salesmen, whose incomes fluctuate or for businessmen, who work on bonuses, which they may not receive until the next year. As long as the income is reasonable for the profession, no underwriter will ever question it.
So, if you needed to make 60,000 yearly for approval, but you only show $54,000 on last year’s W-2, your broker can get you a stated program, and he will simply write $60,000 on the application. Don’t worry, the lender won’t ask for pay stubs or tax returns.
This seems fraudulent, you might say. It isn’t, as long as you follow the guidelines set forth by the lender. Remember, they created this program, so they could loan more money. You’ll pay, of course, because the lender will hit you with a premium on your rate, because the loan is more of a risk. So, instead of getting a 6% rate, you might get as high as 6.75%, but at least you’ll get your loan.
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