Stated income mortgage in Houston TX: Complete guide
Self-employed professionals who can’t prove their income used to rely on alternative financing options such as ‘stated income mortgages’ to buy a home. The reason was that these home loans typically don’t require tax returns or any other documentation. Ever since the financial crisis led to the crash of the housing industry in 2007-08, these loans are however not as common as they used to be. In some cases they are now outlawed, particularly for owner-occupied properties. It means that mostly investors have access to these loans.
If you are a self-employed professional, you should know that there are safer and more practical alternative financing programs compared to the stated income home loans in Houston. These alternatives include owner financing.
Here at Shop Owner Finance, we work with self-employed professionals and help them buy homes without any credit check and income verification. You can buy any home you want with owner financing in our system. In fact before reading this article further, you can start your home start right now by browsing the Houston home listings below. Fill up the form on the property listing page. We will get in touch with you promptly. You can also use our state-of-the-art search to widen your home search criteria.
What are stated income loans?
As the term suggests, these loans are approved merely based on the income you state on your loan application. Unlike banks, stated income lenders don’t scrutinize your documents to verify all the financial details you have provided on your home loan application.
The laws now make it necessary for the lenders to check the borrower’s ability to repay the loan before approving a mortgage application. The lenders do this by verifying your documents including tax returns and credit report.
Why were ‘Stated Income Home Loans’ popular?
There were many reasons for the popularity of the stated income loans in Houston. Here are a few of them:
- These loans required little or no documentation. It made them a perfect choice for self-employed professionals. Unlike a salaried employee, self-employed individuals don’t make a fixed amount of monthly income. Another challenge for the home buyers from this segment is bookkeeping. It’s a very time consuming process to keep records of all the business expenses and income. As a result, many self-employed professionals don’t have proper documentation.
- The process of getting approved for a conventional mortgage and having the funds released on the closing day usually takes a lot of time. The banks follow specific underwriting norms and scrutinize a lot of documents to check your employment history and current income and liabilities. On the other hand, state income home loans don’t require documentation, so the approval process is fast. The lack of documentation requirement makes these loans completely hassle-free for self-employed professionals.
- You don’t need tax returns to get approved for a stated income mortgage.
- You can get the loan up to 70 percent of the property’s value. It means that the LTV is 70 percent. It is typically higher than other types of private loans.
Some disadvantages of Stated Income Mortgages in Houston
- Since the LTV is 70%, you need to make a large down payment. We at Shop Owner Finance recommend that you put down as much as possible – preferably between 15 percent and 20 percent, but arranging for 30 percent down payment may be a big challenge for most home buyers.
- The closing costs can burn a hole in your pocket. These costs are typically higher than what you pay to obtain a traditional mortgage.
- In some cases, these loans can be short-term, so you may not get an amortization period of 30 years like you do in a traditional mortgage.
Houston stated income loans compared to owner financing
Owner financing offers all the advantages of stated income loans. However this financing method goes way beyond what the stated income loans offer to self-employed professionals:
- Owner financing is a completely legitimate financing program. You get the title of the property transferred to you on the closing day. In a recent article, we explained how owner financing is a safe way of buying a home in Houston.
- You can obtain without credit check or income verification.
- You don’t need a down payment of 30 percent or more. As long as you can put down up to 20 percent of the property’s purchase price, you can buy any home you want. Check out this article to know how this is possible.
- In our program, you can buy any home you want.
- The closing costs are more or less the same as they are for a traditional mortgage.
A Texas-based lender recently hit headlines when they announced that they would re-launch their stated income loan program. It created a buzz in the mortgage industry.
Instead of getting carried away by the buzz, you should weight all the pros and cons of this financing method. As already mentioned, there are better and safer alternative financing programs. You should pick the one that suits your individual situation and needs.
If you are looking to buy a home with no credit check or income verification, set an appointment today.