When the housing market crashed in 2007, many people blame stated income and subprime mortgages.
In 2015, though, we’ve seen a return of both stated income and subprime mortgages, though in a different form than before to make them more stable.
Since the return of stated income mortgages provide a great opportunity for real estate investors, we take a closer look at this type of mortgage in this article.
What Is a Stated Income Mortgage?
With a traditional mortgage, a lender requires applicants to document their assets and income on the mortgage application. The lender then verifies the borrower’s income to determine whether he has the ability to repay the loan.
But with a stated income mortgage, the lender does not verify the borrower’s income as stated on the mortgage application. Borrowers, therefore, are not required to provide documentation related to their income such as tax returns, IRS documents, or proof of employment.
Though a little more expensive, a stated income mortgage benefits self-employed individuals, and individuals who receive income that is not on their W-2 (such as employees receiving tips), since it is difficult for these borrowers to document their income. Also, this type of mortgage benefits high-net-worth individuals who, due to privacy issues, do not want to disclose their income and/or have a lender verify their income.
Stated Income Mortgages Benefit Real Estate Investors
Stated income mortgages began to return in 2015, opening the housing market to people who were shut out of the market after the 2007 housing crash.
Re-emergence of stated income mortgages could be one of the biggest developments in the real estate industry in recent years, because self-employed borrowers often have adequate finances to purchase a home, but find it difficult to qualify for a mortgage since it’s difficult to document and verify their income.
Inevitably, the return of stated income mortgages could benefit real estate investors because of increased demand. Individuals who have been forced to rent for years are now able to qualify for a mortgage and purchase a home. And in some cases, these individuals are purchasing the home they have been renting.
Graystone Investment Group
Graystone Investment Group is an experienced Investment Group wholesaling properties in the Greater Tampa Bay market since 2005.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.