stated income loans

0.10 Dollars($)

my husband and i only qualified for a 150K loan when we applied for 350K. our stated income is 90K, however the last 3 years tax returns show 51K as our combined income. (i just recently went from part time to full time and can prove this with employment verification and paycheck stubs. and my husband recently got a raise.)

both our FICO scores are 785, our debt is minimal. we were told we might qualify for 280K with 30% down, with a stated income loan. but we can only do 5% down. do we have any other options? thanks so much!

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi Guest.

Welcome to the forum.

Because of the financial crunch, the lending criteria get tightened. But your credit score is excellent. I think you will have to do at least 20 percent down payment or get a second mortgage for making the down payment. How good is your DTI ratio?

BTW you can shop for other lenders too or seek No-obligation free consultation from the community professionals to know whether you can get approved for the mortgage.

Best of luck,
Larry

Guest 0.10 Dollars($)

thanks for your response. 20% down is a bit high for us. Our DTI ratio is probably above average. the second mortgage idea, might be our best bet, but is this still available? i'm surprised our loan officer didn't recommend this. thank you!

Samantha

Hi Sofia,

Welcome back to forums.

Your FICO scores are good indeed but are you thinking of taking of a stated income loan again? you aren't buying again, so the down payment doesn't come in. Can you please elaborate on your situation?

Samantha

Guest 0.10 Dollars($)

hi there,
samantha--

i think you might have misunderstood my situation a bit, we are first time buyers. we'd *like* to purchase a house around 350K. we could handle a 3-5% downpayment at MOST.

because of our previous years tax returns, we were only approved for 150K loan. but we did not take it since we need at least 300K. we decided to keep looking for other loan options.

larry, above, and a few others i've spoken with have said, without 20% down it will be very hard to do a stated income loan.

but larry said something the others have not, the possibility of a second mortgage *for* the downpayment. i like this idea a lot.

also, we are in california, so is this even possible here?

thanks in advance!

Guest 0.10 Dollars($)

I doubt this is an option with a stated income loan. All the stated income loan programs I am aware of require 20-30% down. But why do you have to go stated income? if you can show you earn $90,000 a year, sounds like it should be easy to show.

A full-doc loan allows you to use your verifiable income from employment, including recent raises or switching from part-time to full-time, as long as your employer can verify this.

I am confused - tax returns are used to find your average income if you have self-employment income. It doesn't sound like you are self-employed, so I am not sure what the income shown on the previous tax returns has to do with it. Many people make more money this year than last, promotions and raises are fairly common. Underwriters use paystubs and VOE's from the employer to figure current income.

You probably already know that loans are approved based on your debt to income ratio. To figure this, add up all your monthly revolving and installment debt payments, and the proposed new house payment including taxes, pmi and insurance... then divide by your verifiable gross monthly income ($7500 a month based on $90,000 combined annual income.) It could be that your debt to income level is just too high, using your current income. Am I misunderstanding your question- just not sure why you would need a stated loan program unless you are trying to use income you can't prove you get but it sounds like your income is all verifiable.

gmakerley · Posted: Wed Aug 13, 2008 7:56 am Post subject:

i agree, bailey. it seemed to me that if there is verifiable income that would allow for qualifying for 3-5% down on a $350K home; that ought to definitely do the job.

maybe there is more there than meets the eye.

Guest 0.10 Dollars($)

The only think I can think of is that perhaps you changed jobs, when you went from part-time to full-time? Have you had some job changes or lapses in employment in the last year or two?

sometimes underwriters cannot use new full-time hourly income if you are in a whole new career, until you have 12 months' under your belt. But if you have been at your current job/career for a year or more, and have gone from part-time to full-time and none of it is commissions or tips, and your employer can verify your guaranteed wages, then I would think you could use your full income. Good luck!

Guest 0.10 Dollars($)

Another idea that I can think of is that perhaps you changed jobs, when you went from part-time to full-time? Have you had some job changes or lapses in employment in the last year or two? Sometimes underwriters will use tax returns if a borrower has started a new job/changed careers, until you have 12 months' under your belt.
You might want to ask a reputable mortgage lender to tell you specifically what income you can use and also analyze your debt-to-income ratio so you have a clear picture of what you need to do to be able to qualify for the mortgage amount you want. Insist on a clear explanation!
I have seen many cases where, by waiting just a few months and paying off some debt or developing a longer employment history, borrowers could qualify for a lot more house than they would have if they hadn't waited.

Stated income loans now have quite a bit higher interest rates besides requiring a large down payment, so if at all possible, I think it is a good idea for borrowers to try to use a full-doc mortgage.

gmakerley · Posted: Wed Aug 13, 2008 9:04 am Post subject:

bailey, you need to navigate around the site some more. register yourself, and you can begin to earn a few dollars with your postings. it's clear you've got some experience to lean on and some words of wisdom, so you may as well join us and reap the benefits.

keep spreading the good word and come back often.

Guest 0.10 Dollars($)

thanks, bailey and george.

yes, my situation is a little complicated. technically, i am self-employed--as far as my taxes are concerned. but i have worked for the same company for 10 years (this and my salary are verifiable), part-time, but now i'm full-time.

i work for a foreign govt. in the US, therefore they don't issue W2s, thus for IRS purposes i am considered self-employed.

our dti ratio, i thought was pretty good, i do have one balance of 9k, on a card, but the interest rate is 0% for 12 months. do banks take things like interests rates into account?

anyway, you guys are sort of encouraging me not to give up. thanks. =)

Guest 0.10 Dollars($)

George, thanks for the suggestion- I may do that- I am always interested in mortgage discussions- both from an origination standpoint to increase my own knowledge base and also to possibly offer some experience or suggestions to borrowers. I thought I would just "lurk" for a while! My background- several years of mortgage origination at Wells Fargo Mortgage and Bank of America mortgage.

Guest 0.10 Dollars($)

Ah, that explains the tax returns and why underwriters will want to average your income. You will likely have to wait until you have full year and can show new tax returns and higher reportable income. (Try not to use as many deductions on your taxes this year to keep your income up!)

No, lenders don't inquire about the interest rates on your monthly liabilities. They only take into account what your minimum monthly payment is. The monthly payment that reports on your credit report is what is used in your debt-to-income ratio. (Any installment debt that has less than 10 months left to pay off usually can be excluded.)

0.10 Dollars($)

(Any installment debt that has less than 10 months left to pay off usually can be excluded.)

that's good to know. thanks very much.

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