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California Stated Income Loans: How They Work, and Who Can Benefit

In this article: An overview of California stated income loans, an alternative type of mortgage financing for borrowers with non-traditional income or other unique situations.

If you’re planning to apply for a mortgage loan in California, but want to avoid the traditional income documentation process, you might want to consider a stated income loan. But before we dive into the details, let’s start by answering the most basic question: What exactly is a stated income loan?

What Is a Stated Income Loan in California?

A stated income loan is a type of loan where the borrower is only required to state their income rather, than providing actual pay stubs or tax returns as proof. This makes the loan application process much simpler and quicker, when compared to traditional loans.

So, if you’re self-employed, have irregular income, or simply don’t want to share all your financial information, a stated income loan might be a good financing option for you.

Let’s shift gears now and explore the benefits of this unique financing option.

What Benefits Do They Provide?

Stated income loans offer a lot of flexibility when it comes to documentation requirements. Unlike a traditional home loan, you won’t have to provide months worth of pay stubs or years worth of tax returns to prove your income. All you have to do is simply state what you earn. This could save a lot of time and hassle, especially if you’re self-employed or have an irregular income.

Another big benefit of stated income loans has to do with the approval process and timeline. Because you’re not required to provide a ton of financial information, the loan approval process can move faster compared to traditional loans. This can be a real lifesaver if you’re in a rush to buy a home or refinance your current mortgage.

Stated income loans provide specific benefits for self-employed borrowers, as well. If you’re running your own business or working as a freelancer, it can be tough to prove your income. With a stated income loan, however, you won’t have to worry about providing traditional income documents.

How Does It Work?

Moving on to the next logical question: How does a stated income loan work in California?

The loan application process is pretty straightforward. For starters, you’ll have to provide some basic information about yourself and your financial situation (name, address, employment status, etc.). You’ll also have to state your income, but you won’t have to provide a lot of documents as proof.

Next, the lender reviews your information and decides whether or not to approve your loan, and for what amount.

When it comes to approval criteria, stated income loans can be easier to obtain when compared to traditional loans. But you’ll still need to meet some basic requirements. For example, you’ll probably need to have a good credit score and a stable employment history.

The most important requirement is that you have the financial capacity to repay the loan, based on your stated income and other factors.

The monthly payments work just like a traditional mortgage loan. You’ll have to make regular monthly payments over a predetermined length of time (known as the “term”), in order to repay the debt.┬áBut you can expect to pay a higher interest rate when compared to a traditional loan.

What Types of Borrowers Use Them?

Stated income loans can benefit a variety of borrowers in California who may not meet traditional lending criteria. This includes (but is not limited to) the following:

  1. Self-employed individuals: For those who are self-employed or run a small business, it can be difficult to prove their income. With a stated income loan, borrowers only have to state their income without having to provide extensive documentation as proof. This makes it a convenient option for self-employed individuals.
  2. High-income earners: For those with high income but a large amount of debt, a traditional loan may not be an option. With a stated income loan, borrowers only need to provide information about their income, but not necessarily their debt. This could make it easier to obtain financing.
  3. Borrowers with limited documentation: For those who don’t have a lot of documentation to prove their income (e.g., tax returns and pay stubs), a stated income loan can provide a solution. Using this financing strategy, borrowers can obtain financing without having to provide extensive documentation.
  4. Other unique circumstances: There are other situations where a California stated income loan could prove useful. For borrowers who have just started a new job, or those who are receiving income from an inheritance, a stated income loan can provide a flexible option.

It’s important to note that stated income loans often come with higher interest rates and fees. So borrowers should carefully consider the overall costs before making a decision. We can review your financial situation to determine if a stated income loan is the right option for you!

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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