Stated Income Mortgages versus Conventional Mortgages

2007-03-08 10:33:40

( Financial )



Stated income mortgages, like a conventional mortgage, is a loan or financing plan offered by financial institutions to people who wish to buy a home. But they differ from conventional mortgages in their requirements, terms and interest rates. Before choosing stated income mortgages over conventional mortgages, you will have to compare the two across important points.

Stated income mortgages will allow you, the borrower, to take out a loan to buy your house after filling up a form stating your income. Simply put, what you state as your income is accepted as the bible truth by the lenders. Generally, to be eligible for stated income mortgage loans, you only need to state your income. Some creditors also require that you declare your debts and your assets so that they can further assess your creditworthiness. You have to be credit worthy and have a verifiable source of income to qualify for this type of mortgage.

Typical or conventional mortgages require more fuss and documentation than stated income mortgage loans. Foremost among the requirements is verifiable income. Lenders usually require your income tax returns for the past 2 years. You also have to declare your assets and liabilities. You also need to have an acceptable credit rating and a verifiable source of income.

It is therefore apparent that stated income mortgages require less documentation than conventional mortgages. Stated income mortgage loans can be taken out on the basis of what you feel your actual income is, whatever your tax returns say. Therefore, if you are not a regularly salaried worker and have many sources of income that are not reflected in your returns, stated income mortgages are for you.

However, for the risk the lenders take in lending you money on the basis of your stated income, stated income mortgages have higher rates than conventional mortgages. You will then have to pay for the convenience with steeper interest rates.

Ultimately, you would have to choose between stated income mortgages and conventional mortgages. Your priorities will determine which type of mortgage loans you will go for.


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