In today’s loan market, many borrowers with sufficient actual income are often denied traditional loans due to insufficient reported income. Whether you’re self-employed, a freelancer, or a foreign investor, many people face difficulties in providing standard income documentation. The good news is that stated income loans offer flexible and convenient financing options for these borrowers.
It’s important to clarify that stated income doesn’t mean no income verification at all. Instead, it refers to loan programs that don’t rely on traditional tax returns to verify income. These loans use alternative methods to verify income, such as bank statements, asset utilization, or 1099 income, breaking away from the conventional income verification model. As a result, borrowers who don’t report sufficient income on their tax returns can still qualify for financing by providing other forms of documentation to prove their financial strength.
Let’s explore several common stated income loan products to help you find the best solution for your needs.
1. Bank Statement Loan
Target Audience: Self-employed individuals or business owners whose tax returns may not meet traditional loan requirements, but who have sufficient cash flow in their bank accounts.
Features:
Instead of using W-2s or tax returns, borrowers provide personal or business bank statements (usually for 12 or 24 months) to verify their income.
Income is determined by the deposits shown on bank statements, not based on tax returns.
No need to submit tax returns.
LTV: You can typically borrow up to 90% of the property’s value, depending on the cash flow shown in your bank statements and credit score.
Summary: While tax returns are not required, your bank statements can still showcase your income. As long as your bank statements demonstrate sufficient cash flow, you can qualify for a loan.
2. Asset Utilization Loan
Target Audience: Borrowers with significant assets but lower income, such as retirees or wealthy investors.
Features:
Income is calculated by dividing the total value of the borrower’s assets (such as stocks, retirement accounts, or savings) over the loan term.
No reliance on reported income, but based on proof of assets.
LTV: You can typically borrow up to 80% of the property’s value.
Summary: Even without a tax return, if you have enough assets, we can treat those assets as a form of income to help you qualify for a loan.
3. DSCR - Debt Service Coverage Ratio Loan
Target Audience: Real estate investors who rely primarily on rental income to pay off the loan.
Features:
The ability to repay the loan is determined by the rental income from the property, not personal income or tax returns.
Generally, the property’s DSCR ratio must be 1 or higher, though some lenders allow “no ratio.”
LTV: You can typically borrow up to 80% of the property’s value, depending on the property’s appraisal and your credit score.
Summary: Instead of looking at your tax returns, lenders assess the rental income from your investment property. If rental income covers the loan, you can usually qualify. This streamlined income verification process is ideal for those with multiple properties.
4. WVOE
Target Audience: Borrowers with high employment income but insufficient reported income.
Features:
Income is verified through a written statement from the borrower’s employer (WVOE) rather than tax returns.
No need to submit tax returns, as verification is based on employer-provided income information.
LTV: You can typically borrow up to 80% of the property’s value.
Summary: While tax returns aren’t required, your employer can provide a written statement verifying that your income is sufficient to support the loan application.
5. 1099 Income Loan
Target Audience: Freelancers or contractors who primarily rely on 1099 income.
Features:
Borrowers can submit 12-24 months of 1099 forms to verify their income, rather than traditional W-2s or tax returns.
Suitable for freelancers or contractors without significant tax-reported income.
LTV: You can typically borrow up to 85% of the property’s value, depending on your 1099 income and credit score.
Summary: Instead of requiring tax returns, you can provide your 1099 forms to verify your income and qualify for a loan.
6. Profit and Loss Statement Loan
Target Audience: Self-employed individuals or business owners who can prove income through their company’s P&L statement.
Features:
Borrowers can submit a CPA- or accountant-signed profit and loss statement (P&L) to verify their income, rather than relying on traditional tax returns.
Ideal for borrowers who may have lower reported income due to tax deductions but whose businesses are profitable.
LTV: You can typically borrow up to 80% of the property’s value, based on the income shown in the P&L statement and your credit score.
Summary: While tax returns aren’t required, a professionally prepared P&L statement can demonstrate your business's profitability and prove that you have enough income to repay the loan.
7. Foreign National Loan
Target Audience: Foreign nationals without a U.S. Social Security Number (SSN) or Green Card.
Features:
Foreign nationals can apply for loans using their passport as identification.
No need to submit U.S. tax returns; ideal for foreign investors.
LTV: You can typically borrow up to 75% of the property’s value.
Summary: Although U.S. tax returns aren’t required, foreign nationals can qualify for loans with proper identification and proof of stable income.
Stated income loans offer flexible financing options for borrowers with insufficient reported income. If you’re unsure which loan program is right for you, book an online consultation with us for a free evaluation of your personal situation. If you already know which program suits your needs, click here to apply online!
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