Stated Income Loans

Reduced Documentation Loan Program: (Self-Employed Only) On a Maximum LTV of 65% to 750,000, 60% LTV to 1 Million, and 50% to 3 Million or less, a self-employed borrower may apply for a stated income program whereby the income stated on the application will be considered for qualifying purposes. The borrower must provide proof of self-employment as well as verification of all asset accounts for prior 60 days. Underwriting will rely heavily upon a satisfactory credit profile and strong, substantiated asset position for loan approval.

The RDLP Program is for self-employed “business owners” only* buying or refinancing, including Cash-Out, their 1-4 family primary home or their one family or condo vacation home. Fixed, ARM or Interest Only products are available for this program. Debt to Income (DTI) should not exceed 36/44. 

Borrower must provide proof (such as a CPA letter) they are self-employed owner in an established business for at least 2 full years and their credit should be very good to excellent.**  A 4506 is not required. While there is no minimum reserves requirements verified liquid assets including PITI reserves need to be supportive of  the borrowers stated income and reasonable for the transaction.*** 

*The borrower needs to be the owner of an established business entity that can be independently verified by a CPA or some other means. 1099 Independent Contractors do not qualify for this program and often work for one or more businesses but may not actually own the business. Landlords are usually not considered self employed business owners for this program. All rental income must be verified by leases.

*The RDLP Program may be combined with a borrower (including his/herself) that has a salary or other verifiable form of income on the same application. The S/E borrower states their income, confirms ownership and verifies all assets to support that income. The salary borrower states and verifies their income by traditional means such as W-2's and pay stubs. The LTV and rates are based on the RDLP program. 

Although FICO scores are not used to evaluate any loan applications the borrower should have very good credit and on RDLP programs the credit history should be substantial and excellent. Any reported derogatory items must be explained.

Personal credit use and history are very important. Over extended use of credit will be a concern. The DTI ratios should never exceed 36/44 on the RDLP.

**A strong mortgage payment history means no late payments past the grace period, usually the 16^th of the month. This is important. Copies of canceled mortgage payment checks or a detailed mortgage payment history from the lender showing no late fees may be required on a case-by-case basis.

Reserve Requirments:

Reduced Documentation Loans Require 12 Months PITIA

Reduced Doc loan reserve sources now include savings, checking, CD’s, money market, brokerage, mutual funds, trust accounts, VESTED AMOUNTS IN RETIREMENT ACCOUNTS AND CASH VALUE OF LIFE INSURANCE POLICY OR CONTRACT.

Examples of Unacceptable Reserve Sources:

Funds that cannot be withdrawn under circumstances other than the account owner’s

Retirement, employment termination or death;

Funds that have not yet been vested;

Stocks held in an unlisted company’s name;

Stock options or non-restricted stock shares;

Personal unsecured loans (including family related loan agreements);

Interested party loans or advances;

Proceeds from a cash-out refinance transaction

Personal credit use and history are very important but FICO scores are not used. Over extended use of credit will be a concern. The DTI ratios should never exceed 36/44 on the RDLP.

Gifts, including gifts of equity and refinance of recently inherited property are acceptable on the RDLP program but at least 35% of the purchase price or the value of the inherited property must be in the  borrowers own personal and seasoned funds.

Business funds are allowed for some of the down payment or reserves if the borrower is 100% owner of the business and their company’s accountant indicates it will not adversely affect the business.

Questions? Call us today 732-582-3338!

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