Stated Income Loans in California
Among the most cumbersome things in acquiring a mortgage loan would be involving in preparing a lot of paperwork, which is certainly rather hard to arrange particularly with the required taxes as well as other details. In addition, if there is no sufficient document or any of your documents is missing which is required by the lender, then you are going to get rejected for your loan application. Thus, in order to stay away from these kinds of troubles, that is where the stated income home loan has been introduced.
California stated income home loan is an excellent offer to self-employed individuals. Generally self-employed individuals experience with difficulty in providing proof for their income. The moment loan providers assess any loan application most of them will conduct many measurements and calculations where income is among the primary factors that they would want to figure out. For self-employed people it can be an issue to come out in detail and showing the proof of their income.
By following the normal procedure the mortgage lender would likely to look at your past tax statements, which can again put you in a difficult situation for you to show the proof. Thus, to steer clear of all this fuss, the California stated income home loan plan has been came up with the purpose to aid people to apply for home loans. A stated income home loan is quickly become very popular since they are no doc loans versus other loans that need to document their income, or called “full doc”.
Requirements for California Stated Income Home Loan
At the time you make up your mind to choose for a California stated income home loan, there are still some criteria set by the loan providers that you need to meet. These requirements include:
- You need to show them 5 credit accounts.
- Your credit score to be at least 620.
- Any foreclosure or bankruptcy that you have needed to be discharged between three years with re-established credit.
- 2 months PITI (Principal, Interest, Taxes and Insurance) reserves are needed with an LTV (Loan to Value) 80%. If not, 6 months reserves will be required. At least 5 percent down payment is needed from your own funds.
p/s: You may refer to PITI explanation in case you don’t know what is it about.
Currently, the federal financial regulatory agencies viewed stated income loans with their assessment of troubles in the subprime market and figured that these types of loans should be authorized only when there are mitigating factors which evidently prevent the requirement for immediate verification of compensation potential.
Since the regulations ruling stated-income loans to be part of the variety underwriting rules where everything depends on some other things else, there will always be mitigating factors involved in between. Ultimately, the loan providers chosen to undergo the action which is not doing any harm cause to them. Hopefully the legislators are going to opt for the same things for the good of consumers.
Are Stated Income Loans in California Still Exist?
As of now, due to the economic downturn and the collapse of the real estate market in U.S., this stated income home loans in California may have limited or extremely restrictive accessibility because of the collapse of the real estate market. We can conclude that the stated income loans are virtually vanished from the finance market at this moment. Of course, these loans were designed for small business proprietors as well as those who experienced difficulty in proving their income. But then these types of loans were used for two spouses, one got bad credit and their income couldn’t be used for the reason that they are not entitled to the loan. Subsequently there were some people who simply taken advantage of the stated income loan programs for what it was initially created for, that created the great mess and substantial foreclosure rates on this financing option.
Even now you still can find some loan providers who may continue to be underwriting another similar loan, referred to as SIVA (Stated Income, Verified Assets), but the qualifications and requirements for these types of loans will be tough and the requirement is rather strict where you need to provide them with lot of verifiable assets to ensure the credit risk is minimum for them to lend out the loan. A good example may well be a substantial amount of retirement funds, where the borrower wishes to retain in these funds instead of buy a home and causing their assets get depleted. However, the borrower will still need to come out with a minimum of 25% to 40% of down payment.