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.

***On a RDLP liquid assets including reserves must support the borrower’s current stated income. The borrower must demonstrate an ability to save money. A general rule of thumb is the borrower’s personal seasoned liquid assets (non-retirement assets) derived from earnings should be at least 1/3 to 1/2 of the borrower annual stated income – at maximum LTV and/or a cash-out refinance the assets should be at least 1/2 and at a lower LTV and/or R/T refinance the assets should be at least a 1/3.  Assets must be seasoned two months at application.

Retirement assets are typically not considered supportive of the current stated income. Also some stagnant assets such as CD’s, inactive securities accounts, annuities and whole life insurance policies with no recent deposit activity may not be considered supportive of the current stated income and the borrower’s current ability to save money has not been demonstrated. Also, assets in shared accounts with persons other then the borrower’s spouse may not be accepted. These accounts may not be considered as a substitute for liquid seasoned personal assets.

For purchase, reserves should be at least 6-12 months PITI depending on LTV and debts. However, factors such as other real estate and retirement assets are considered. 

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.

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