Stated Income Loans

People who wish to purchase a house do so at different points in their lives and careers, sometimes when the amount of income is less than desired.  Self-employed individuals or those who have trouble documenting their income will often choose to get a “stated income loan.”  With this type of loan, the application asks the borrower to state their income, and the borrower is then qualified based on that amount of income.

It might be tempting to overstate one’s income on a stated income loan, in order to qualify for a larger loan, but there is considerable risk in doing so.  For one, if the borrower is found to have intentionally mislead the lender, the loan could be called in full (usually resulting in sale of the house), or the borrower could be prosecuted.  Most lenders perform fact-checking on 10% of the loans they process, and they also may require IRS tax returns.  If the stated income on your loan does not match up with the amount on your IRS return, or there are other discrepancies, your rouse will have been discovered, and you will be in big trouble.

If brokers advise you to use a false income amount on a stated income loan, be very cautious.  Sure, you might not be caught, and you might qualify for a larger loan, but the broker is not the one at risk by suggesting this advice: if you are found to have lied on your loan application, expect to find yourself in a very difficult situation, financial and otherwise.