Stated Income Credit Lines
If you own your own business, are self employed or get most of your income from commissioned sales, then you have probably run into trouble when applying for credit. Specifically when you are looking for mortgage refinance options you have difficulty being approved because you can't prove your income by traditional means. Financial institutions are beginning to realize this problem and are coming out with unique solutions called stated income loans and lines of credit.
A stated income HELOC doesn't require that you supply the usual paperwork that states how much money you make a year. You advise him or her what your annual income is and they use that number at face value. Then when you are approved you can access the equity you have in your home via a lone of credit.
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.
In order to be approved for this type of loan you need to have very good credit and a very high credit score. The lender looks for this because they do not request you to bring in pay stubs or W2s. They increase their risk when they don't verify income, so they look to shore this up in other areas.
The interest rate is often a little higher as well. It is not drastically higher, but again the lender is taking on additional risk and prices the product accordingly. There may be additional fees as well.
Some financial institutions will also put criteria on how long the applicant needs to have been in business. The may also include other factors such as payment shock, where the new payment can not be more than fifteen percent of your existing shelter payment. Essentially, because they are opening themselves up to additional risk by not verifying income, they endeavor to ensure that you are as strong as possible in all other areas of the approval criteria.
If you are self-employed or are paid mostly on commission, do not give up hope on getting a home equity line of credit. Talk to your local financial institution, mortgage broker or search the web for a lender that offers stated income loans or Alt-A products. You may find it is not as difficult to be approved as you first thought.
A stated income HELOC doesn't require that you supply the usual paperwork that states how much money you make a year. You advise him or her what your annual income is and they use that number at face value. Then when you are approved you can access the equity you have in your home via a lone of credit.
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.
In order to be approved for this type of loan you need to have very good credit and a very high credit score. The lender looks for this because they do not request you to bring in pay stubs or W2s. They increase their risk when they don't verify income, so they look to shore this up in other areas.
The interest rate is often a little higher as well. It is not drastically higher, but again the lender is taking on additional risk and prices the product accordingly. There may be additional fees as well.
Some financial institutions will also put criteria on how long the applicant needs to have been in business. The may also include other factors such as payment shock, where the new payment can not be more than fifteen percent of your existing shelter payment. Essentially, because they are opening themselves up to additional risk by not verifying income, they endeavor to ensure that you are as strong as possible in all other areas of the approval criteria.
If you are self-employed or are paid mostly on commission, do not give up hope on getting a home equity line of credit. Talk to your local financial institution, mortgage broker or search the web for a lender that offers stated income loans or Alt-A products. You may find it is not as difficult to be approved as you first thought.
About the Author:
If you are self employed, get more details on the stated income home equity credit line at Pat's mortgage website.
posted by Debt Consolidation Loan at
8:07 AM
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