Before moving onto the conditions and benefits of stated income loans, let’s have a look at it first.
Stated Income Loans California
Stated income loans are a type of loan used back in early 2000 in which the person states their income to get approved for their loan. The income was never verified, lenders base their willingness to lend based on the credit score and income stated. Since the mortgage meltdown of 2008, stated income loans do not exist anymore, unfortunately. The alternative to stated income loans has become bank statement loans whereby the borrower shows 12 to 24 months of bank statement to prove the ability to repay the loan on time. The borrower can also provide alternative sources of income, like rental agreements, pension funds, or social security to show the ability to repay the loan.
One of the best things for Californians is this alternative documentation method has opened the doors for self-employed business owners to become homeowners, invest in investment properties or buy 2nd homes.
The Unique Situation of California For A Stated Income Loan
The situation in California is unique as many lenders want to give loans in this booming real estate market. Moreover, lenders understand the flexibility entrepreneurs and business owners are looking for with alternative documentation loans. Bank statement loans do the job. As the competition between the lenders is rising, the requirements for the borrowers are also becoming more flexible to achieve the American dream of homeownership.
Conditions to Obtain Stated Income Loans In California
The following are still some conditions that must be understood.
- Proof of Income is a Must
They have to show relevant proof of income that they are still or were earning through a place.
The borrower must show their bank statements to ensure the continuous flow of money in their bank accounts every month. This gives surety to the lender that the person taking the loan will be able to repay it.
- The Slightly High-Interest Rate
In exchange for the alternative documentation requirement, the borrower must understand the interest rate is slightly higher than a traditional income documentation loan.
- The Condition of the Credit Score.
The next condition for the loan grant is the credit score. The person borrowing the loan must have a credit score of 660 or higher.
The credit score will help determine the down payment requirement and interest rate. Some banks vary and require 700 FICO or higher but it really depends on which lender you working with.
- Cash Reserves
There must be proof of cash reserves of at least six months’ reserves in the borrower’s bank account. This gives the lender surety you have enough money to weather any temporary setback in order to pay the loan on time.
Lender reserve requirements vary from lender to lender.
Are you looking to list your home for sale in the San Francisco Bay Area? Then try our number one certified real estate partner Baylisting.com
Do you have a structured settlement that you would like to convert to cash? Try our partners at www.mystructuredsettlement.net