4 Scenarios when Stated Income Home Loans Can Benefit the Lender

Stated income home loans can come in handy under several different circumstances. With a stated income home loan, the lender takes you at your word. Therefore, you do not have to verify what you tell them. Although they are a little risky, there are scenarios where they can benefit you. Here are some of the most popular conditions that might warrant a stated income home loan.

1. Self-Employed

One of the most common scenarios for using a stated income home loan is when you are self-employed. Self-employed people have notoriously been denied common loans. Many self-employed people do not have a regular enough income to get approved for a traditional loan. Traditional lenders have certain income guidelines that they go by in order to approve loans. If you don't meet the guidelines, you will not be approved. Therefore, before stated income home loans came into play, many self-employed people could not get a mortgage. However, with this type of loan, they can now go out and get the mortgage that they need.

2. Contractors

Contractors might have regular work from a company and still not be able to get a traditional loan. With a contractor relationship, you are not an employee of the company that pays you. Therefore, in the bank's eyes, you could lose your income at any moment. A common example is a flooring or cabinet installer. They often work for one particular store every day for years. However, the company has an independent contractor relationship with them so they do not have to pay benefits and handle their taxes. With a stated income loan, these contractors can get the loan that they need without having to get a traditional job.

3. Short Timeline

Another scenario that might warrant you using a stated income home loan is when you need a mortgage fast. With a traditional lender, you have to take more time to get everything approved. They have to verify your income and your employment. This can add days onto the mortgage approval process. When you don't have a lot of time to spare, this can be a very valuable feature of a stated income home loan. They do not verify anything and they can get you approved quickly as long as your credit score is sufficient.

4. Lump Sums

Another scenario that would be good for a stated income home loan is when you have a lump sum of money with limited income. You know that you can afford the mortgage for a few years because you have enough in savings to make the payments for a while. However, a regular lender would not approve you because you currently do not have enough income. You are either on sabbatical or between jobs and you still need a house. If you don't want to deal with answering questions and the increased scrutiny, a stated income home loan could be for you.