Stated income home loans allow those who are self employed or do not have documentation of earned wages to state a wage on the mortgage application and qualify for a mortgage based on that stated income. The advantages of a stated income loan are that the borrower does not need to verify income and approval is generally faster than with traditional home loans. The disadvantages of this type of loan are that interest rates and the required down payments are often higher than with traditional home loans.

To qualify for a stated income home loan you need to have verifiable employment and assets with verifiable income which is too low for the home you wish to purchase. Following an analysis of your debt to asset ratio, the amount of income that you an state on the mortgage application will be determined.

Borrowers have two options for a stated income home loan and they are the interest only option and the prepayment option. If a large part of your income is non-salary - or if you want to maximize the tax benefits of a mortgage - the interest-only option may be a sensible choice. Unlike the traditional 30-year amortizing loan, which bills you monthly for principal and interest, the interest-only option allows you to pay interest only for the initial fixed period. Once the initial fixed period ends, you are billed for both interest and principal, as with a traditional amortizing loan and the loan is re-amortized for the remaining years.

Borrowers can also opt for a prepayment penalty which may lower your rate by as much as a 1/4 -3/8 percent with the 5-year prepayment penalty option, next is the 3-year and 1-year prepayment penalty and finally the no prepayment penalty.

Full Doc

A full doc loan is one that requires that the borrower present all necessary documents, including inc me verification to be considered for the home loan. This type of loan usually offers lower rates because it is less risky for the lender. On the other hand, if you are self employed you may not have all of the required documents and should look into a stated income loan.