Stated Income Home Equity Loans

Stated income home equity loan may be a breeze for the majority of loan applicants, but for some individuals this can be a major pain in the ass. So what’s the science about Stated Income Home Equity Loan? For a rather hefty explanation needed to get this point through, the mechanics is really simple.  

The best home equity loans are generally for conforming loan applicants. That is requiring a proof of income, the documentation of asset or collateral and other loans/debts (debt ratio) –generally adhering to the Federal National Mortgage Association’s (FNMA) strict lending guidelines. So for a home equity loan to push through, it requires a great deal of documentation. Sometimes, procedures could even take months to get approved. That’s how tedious home equity loans can get. 

But if for some reasons an applicant choose not to disclose any of the documents (whether the absence of such or for personal privacy reasons is beyond our explanation) will he/she can still avail an equity loan? The answer is a definite yes. But certain criteria should be met before ‘no doc’ home equity loan should be considered. One such criterion is impressive credit history. 

Stated income home equity loan is a loan made without the presence of the usual documentation, thus called “No/Low Doc” Home Equity Loan or “No Ratio” Home Equity Loan or NIV (No Income Verification) or just stated income home equity loan. This loan type is useful. If for example an applicant cannot disclose an income statement (or debt statement) because he is self employed or is a businessman who gets cash by other means than a monthly income, then stated income home equity loan is a useful option. 

That’s what makes stated income home equity loan also a popular choice –for those who can afford it. The absence of documents makes the loan process swift. 

But surely one such good option should have its share of drawbacks? Of course it has. The criterion for good credit rating is one thing most loan applicants can never maintain. And stated income equity lenders are rather strict with this one. Furthermore, since the absence of the usual documents are tolerated, the interest rate that accompany most stated income home equity loan is large since lenders will generally consider the applicant as  risky borrower. However risky or not, a good number of aggressive equity lenders are offering more competitive rates for stated income home equity loans to applicants with high credit ratings. 

Let’s wrap this up with an illustration. If Steve Jobs would like to have a loan with the Bank of America, will he be awarded one with just a $1 annual?