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by Amresh Singh
8 min read
Want to own a house in California but don’t know how to without traditional income documents to verify your income? Let us introduce you to California Stated Income Mortgage!
This is ideal for self-employed borrowers, gig workers, contractors, or anyone with irregular income streams. Let Stated Income Loans take you a step closer to your homeownership dream in California.
Let’s get started!
Is Buying a House in California a Good Idea?
Can I Buy a House in California Without Traditionally Verifying My Income?
Yes! You can buy a house in California if you do not have traditional documents like W-2 forms or tax returns to verify your income. In this case, you must use alternate methods to verify your income and establish your creditworthiness.
One such method is Stated Income Mortgage California. As the name suggests, borrowers can declare their incomes and use alternate methods like bank statements, P&L statements, etc., to establish their creditworthiness.
To make the most of Stated Income Mortgages, it is vital to understand them in detail. So, let’s dive in!
Stated Income Mortgage California: Everything You Must Know!
- Definition: Stated Income Mortgages, or Stated Income Loans, are specialized mortgage programs tailored to individuals who face challenges providing conventional income documentation, such as W-2 forms or tax returns.
- Who Is It For: This mortgage option is primarily aimed at self-employed individuals, freelancers, small business owners, and those with irregular income sources, making it easier for them to secure a loan.
- Income Verification Process: Instead of relying on standard income documentation, Stated Income Mortgages allow applicants to declare their income on the loan application. However, to establish the creditworthiness of the borrowers, lenders review bank statements, P&L statements, cash reserves, asset documents, 1099 forms, etc., before approving the loan.
- Down Payment and Interest Rates: To qualify for Stated Income Mortgages, borrowers typically need to make a higher down payment than a conventional loan. Additionally, you can expect a higher interest rate for this loan program than traditional loans.
- Versatile Use: Stated Income home loan can be utilized for various purposes, such as purchasing a primary residence, a second home, or investment properties.
How Does Stated Income Mortgage Work?
Let us understand the workings of Stated Income Mortgages with the help of a case study:
Meet Joe Cannes, a talented self-employed web developer with a thriving freelance business. Joe aspires to purchase his own home but faces a common challenge among self-employed individuals – providing traditional income documentation, such as W-2 forms or tax returns. Fortunately, Joe learns about Stated Income Mortgages, a specialized mortgage program designed for individuals like him, and decides to explore this option to fulfill his dream of homeownership.
Determining Eligibility
- Joe contacts a reputable lender to discuss his financial profile. The lender assesses Joe’s credit history, debt-to-income (DTI) ratio and financial stability.
- Despite being unable to provide standard income documents, Joe has maintained an excellent credit score and a stable financial track record.
- The lender determines that Joe meets the eligibility criteria for the Stated Income Mortgage.
Gathering and Verifying Alternate Documents
- Upon establishing Joe’s eligibility, the lender requests alternate documents to verify his income.
- Instead of relying on traditional income verification methods, Joe can “state” his income on the loan application.
- He provides the lender with a detailed declaration of his earnings, supported by additional documentation such as bank statements and P&L statements from his freelance work.
Discussing the Terms and Conditions
- Impressed with Joe’s creditworthiness and the accuracy of his stated income, the lender proceeds with the application process.
- Joe and the lender engage in discussions to determine the specific terms and conditions of the Stated Income Mortgage.
- They agree on an appropriate interest rate, loan terms, a down payment amount, and a monthly repayment structure that aligns with Joe’s financial capacity.
Acquiring the Loan
- With the terms and conditions agreed upon, Joe and the lender finalize the Stated Income Mortgage application.
- The required paperwork is completed and submitted for review. After thoroughly evaluating Joe’s financial profile, the lender approves the mortgage.
- The lender then disburses the approved mortgage amount to Joe, and he happily receives the funds in his bank account.
What are the Requirements for Getting a Stated Income Mortgage in California?
| Criteria | Requirements |
| Credit Score | 620 or higher |
| Down Payment | 20-25% of the price |
| Debt-to-income Ratio | 40-45% |
| Documents | Bank statements, P&L statements, cash reserves, asset documents, 1099 forms, etc. |
How Can I Get a California Stated Income Loan?
This section offers a clear and concise representation of the Stated Income Mortgage application process, allowing individuals to understand the steps in obtaining this type of mortgage loan.
Step 1: Deciding the Right Loan Program
Explore various loan options under the Stated Income Mortgage. Assess your specific needs and financial situation to choose the most suitable program.
Examples of loan options: Debt Service Coverage Ratio loans for real estate investors and bank statement loans for self-employed borrowers.
Step 2: Finding the Right Lender
Research to find lenders offering your chosen loan program, like bank statement loans or self-employed mortgages. Look for lenders providing competitive deals and favorable terms.
Consider using services like HomeAbroad to connect with experienced mortgage lenders in California.
Step 3: Gather the Required Documents and Submit the Application
Gather all necessary documents like 12-24 months bank statements, P&L statements, cash reserve proof, asset documents, 1099 forms, etc. The lender might also suggest some supplementary documents. Submit the completed application along with the collected documents to the chosen lender.
The lender will review the submitted documents.
Step 4: Approval of the Application and Closing
The lender will approve your Stated Income Mortgage application if you meet the eligibility criteria. Carefully review the terms and conditions provided by the lender.
Proceed to close the deal once you are satisfied with the terms.
Step 5: Loan Amount Dispensation
After the approval and closing, the lender will disburse the agreed-upon loan amount. The loan amount will be transferred to your bank account within a few days.
Types of Stated Income Mortgages in California
| Loan Type | Requirements |
| DSCR Loan | The DSCR loan program caters to self-employed individuals and real estate investors. It evaluates the borrower’s debt service capacity based on monthly gross income from investment property. A credit score of 620 or higher and a DSCR ratio of 1 or above are required. The down payment typically ranges from 20-25%, and applicants must provide specific documents like property appraisal and the 1007 rent schedule. |
| No-Income Verification Loan | No-doc mortgages are designed for self-employed individuals without traditional income documentation. Lenders use alternative methods like bank statements, 1099 forms, or assets to assess credibility. A credit score of 620 or higher and a down payment of 20-25% are recommended. |
| Asset-Based Mortgage | Asset-based loans provide an alternative to traditional income verification. Borrowers use assets like stocks, bonds, and real estate as collateral. Eligibility requires a DTI of 45% or less, a credit score of 620 or higher, and a down payment of 20-25%. |
| Self-Employed Mortgage | The self-employed mortgage program is suitable for those owning 25% or more of a single business or working as contractors/service providers. Instead of tax returns or pay stubs, lenders review 1099 forms and cash flow. A credit score of 620 or higher and a down payment of 20-25% or more are typically necessary for qualification. |
| Bank Statement Loan | Bank statement loans in California target self-employed borrowers without standard paystubs. Lenders assess income based on bank statements and P&L statements for 12-24 months. A credit score of 620 or above, a down payment of 20-25%, and a debt-to-income ratio (DTI) of 45% are typically required. |
Get Quotes from the best Stated Income Mortgage lender in California
What are Some Advantages and Disadvantaged of Stated Income Mortgage?
Pros of Stated Income Mortgage:
- Stated Income Mortgage offers faster approval than traditional loans due to its flexible documentation requirements.
- Lenders do not conduct rigorous checks on employment history, making the qualification process easier.
Cons of Stated Income Mortgage:
- Higher interest rates and fees are common with this type of loan.
- Moreover, limited availability among lenders can be a challenge for borrowers seeking this particular loan option.
- To mitigate the risk associated with these loans, lenders often impose a lower maximum loan amount than conventional loans.
Current Mortgage Rates in California
Note: Please be aware that the stated income mortgage rates mentioned here are for informational purposes only and may not reflect the actual rates offered by lenders. It is important to note that there might be higher interest rates for stated income mortgage rates than traditional mortgage loan rates.
- The average 30-year fixed mortgage rate in California was 6.65% (decreased by 3 basis points from 6.68%).
- California mortgage interest rate on July 30, 2023: 6.65% (up 2 basis points from last week’s 6.63%).
- Average 15-year fixed mortgage rate in California: 5.90% (decreased by 2 basis points from 5.92%).
- Average 5-year ARM mortgage rate in California: 6.28% (reduced by 3 basis points from 6.31%).
Finding Best Stated Income Mortgage Lenders in California
Let HomeAbroad be your trusted guide in California’s Stated Income Mortgage market, providing a smooth, stress-free experience.
- Our curated network of certified and experienced lenders ensures top-notch service with personalized mortgage plans tailored to your goals.
- Enjoy flexible terms that fit your budget and lifestyle while our streamlined application process eliminates paperwork and waiting periods.
- Count on expert guidance and constant support from our experienced mortgage lenders, who value transparency, ensuring no hidden fees or surprises. Choose HomeAbroad for a reliable and honest mortgage solution.
Conclusion
California Stated Income Mortgage might be the perfect fit for you if you’re self-employed, a freelancer, a real estate investor, or lack conventional income verification documents. This loan program caters to various financial situations, offering flexibility and convenience.
Let this article be your guide to understanding and maximizing the benefits of these loans. Contact HomeAbroad to connect with an experienced lender who can provide the best deals, ensuring a smooth and favorable borrowing experience.
FAQs
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Can you use stated income on a mortgage in California?
Yes, stated income can be used on a mortgage in California. These loans allow borrowers to declare their income without traditional documentation, using alternative methods like bank statements, P&L statements, and 1099 forms to establish creditworthiness.
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What credit score is needed for a stated income mortgage in California?
Credit score requirements for stated income mortgages can vary, but most lenders prefer a higher score of 620 or more.
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Can I get a Stated Income Loan if I’m self-employed in California?
Yes, self-employed individuals in California can qualify for Stated Income Loans designed for borrowers with difficulty providing traditional income documentation.
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What are the interest rates for Stated Income Loans in California?
Interest rates for Stated Income Loans in California vary based on lender policies, borrower creditworthiness, loan amount, and loan-to-value ratio. They may be slightly higher than traditional mortgages due to increased risk.
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Do I need a higher credit score requirement to qualify for a Stated Income Loan in California?
While credit score requirements vary, a good credit score of around 620 is generally beneficial for better terms and rates.
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Are Stated Income Loans a good option for real estate investors in California?
Stated Income Loans can be suitable for real estate investors in California, especially those with multiple investment properties or complex income structures, offering flexibility in income verification.
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Can you do stated income on an FHA loan in California?
No, lenders do not accept stated income for FHA loans in California. FHA loans require documented proof of income.
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How do Stated Income Loans work in California?
Stated Income Loans in California allow borrowers to state their income on the application without traditional documentation, using other factors to determine loan terms.
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Can I use a Stated Income Loan to refinance an existing property in California?
Yes, it is possible to use a Stated Income Loan to refinance an existing property in California, but eligibility and terms vary among lenders. Consulting with mortgage professionals is essential to understand specific requirements. Contact HomeAbroad for a hassle-free connection to a trusted lender.
in the financial services industry domain.
Prior to co-founding HomeAbroad, Amresh has worked for one of
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