Stated Income Loans have become the target of recent scrutiny. In the State of Massachusetts more than half a dozen mortgage brokers have been shut down recently due to "fraudulent" stated income loans. Before jumping head first into this brand of loan it is important to familiarize oneself with the different rules, regulations, and laws surrounding them.

A stated income loan is a loan where you must prove your employment information but you do not need to document or show proof of your income. You will simply state how much money you make on the loan application. Obviously there has to be a catch or everybody would do this if you don't have to waste time finding your tax information, W2's and pay-stubs. The catch is that there is usually a small rate bump added to your interest rate due to the loan being higher risk to the lender. The part of the loan that people do not understand is that a stated loan does not mean you are permitted to lie on your loan application when you are stating your income. You must disclose your "true" income or the actual amount of money you are making each month. When you sign your loan application you are agreeing that all of the information on the application is true and correct to the best of your knowledge. Therefore, even though you are stating your income on the application make sure you are being accurate. If you have any questions about a stated income loan, please ask your mortgage professional if this type of loan may be right for you or if another loan type might be better. There are many other types of loans for people with hard to document income.