Stated Income Mortgages Can Help

Home ownership is a dream of many American couples and singles, but a large percentage of would-be buyers don’t believe they will be able to qualify for a loan. Many couples possess income or assets that just don’t show up in W-2s or tax returns, but are true sources of income and should be considered for loan qualification. The good news for borrowers in this situation is there are solutions. One option that might work for some is a Stated Income Mortgage. Like all loans, there are positive and negative aspects of this loan, so these should be carefully examined and considered.

Often times, small business owners don’t have the necessary documentation to prove to lenders because of a cashed based business such as a tavern or restaurant. Many lenders require copies of tax returns that show profits in order for a home mortgage or home refinance loan to be approved. In some situations, small business owners find it necessary to take from their home’s equity and invest in their business to keep above water. Lenders that offer stated income based loans often can look at bank deposits, allowing an average to be taken from in some instances, only the last twelve months, and base the loan amount upon an extrapolation of that average, allowing for businesses whose profits may ebb and flow over the course of the fiscal year to qualify for a higher amount.

Often times, couples have a spouse that might stay at home to watch the children and care for the household. This spouse might however work in spurts, for example seasonally, or per engagement, such as a performing artist, ski instructor, etc. Cash wages for this spouse can be qualified through submitted bank statements that show that in fact extra income is available to add to conventional income and increase borrower ability to qualify for a requested amount.

A stated income loan can help borrowers whose incomes are considered unconventional and unsupportable by many lenders qualify for the loan they need for their house or budding business. Unfortunately, this somewhat relaxed consideration of qualifications might allow some to borrow who are not going to be able to keep up with monthly payments slip through the cracks. In order to protect the greater risk taken by the lender, the interest rate might be steeper than with a conventional loan. Careful deliberation of all available options should occur before committing to any loan. Stated Income Loans are beneficial and just might be the way to make an unlikely dream of home ownership come true.

About the Author: Jeremi McMaster is Chief Executive Officer of FreeHomeRefi.com, leading provider of mortgage refinancing solutions. For information on refinancing online, go to
www.FreeHomeRefi.com.

Negative Amortization Explained

When considering financing for the purchase of a new home or business, it is easy to get bogged down in all the details and options available. It is necessary, however, to consider all available avenues and lenders in order to assure an optimum package of financing is attained that will fit the particular need and budget. An available option that many first time homebuyers consider is a fixed loan with a clause providing for negative amortization for the early years of the loan. Loans that include this option are often referred to as graduate payment mortgages, or GPMs, and can be very useful to singles or couples just starting out that want to take advantage of investing in personal property in the present in order to build for their future, though their incomes might not be conducive for a large mortgage payment currently.

In a conventional loan, the payment a borrower makes is made up of two parts: the amount paid upon the interest of the loan and the amount that is applied to the principal. This amount toward the principal is referred to as amortization of the principal, and reduces the overall amount a borrower owes the lender. An example of amortization in action: A certain borrower’s loan from a lender is $200,000 at 5% interest. His or her mortgage payment each month of $1000 might apply $800 to the interest accrued, while $200 go towards the loan amount. This application or amortization to the principal brings the loan amount down to $198,800 after the first month. A negative amortization clause would allow the borrower to pay a much smaller payment; an amount less than the interest accrued. This can help allow buyers with smaller incomes qualify for a larger loan because they are agreeing to an option that could result in a longer and costlier payoff in the long run. Most negative amortization mortgages offer borrowers up to four payment options each month, ranging from a 30 year fixed payment, an interest only payment, to a less than the interest accrued payment. These flexible payment options are also attractive to buyers who need to have cash flow available for businesses or other sorts of investment ventures.

Borrowers should feel empowered to shop around and find the exact package that fits their needs perfectly. Lenders such as HomeRefi.com are willing to work with prospective buyers, providing them with all the information necessary to make an informed decision, making home ownership a reality.

About the Author: Jeremi McMaster is Chief Executive Officer of FreeHomeRefi.com, leading provider of home refinance solutions. For information on refinancing online, go to
www.FreeHomeRefi.com.