Friday, 08 May 2020 17:52

Your Comprehensive Guide to Stated Income Lenders

Your Comprehensive Guide to Stated Income LendersInvestment property financing is a lucrative tool if you have good credit and know how to leverage the stock market. It does, however, generally require that you have the income to support a loan and if you’re self-employed, that can be a unique barrier to receiving rental property loans.

Stated income lenders are one way you can receive financing for an investment property. They are the best option for people who don’t have a traditional source of income but still want to take advantage of vacation rental property loans.


What Is a Stated Income Lender?

A stated income lender is a financial institution that offers investment property loans to investors who don’t have a traditional income statement, like a paycheck stub, W2, or 1099. This means they review your personal credit and look at alternative sources of income, like your bank statements.

 

There were traditionally a few different types of stated income loans depending on the lender you chose to work with, though they aren’t all available now:

  • Stated-income, stated-asset loans: SISA loans didn’t require verification of income or assets, but they became significantly risky for most lenders. As such, they are no longer available.

  • Stated-income, verified-assets loans: A SIVA loan will take a statement of your income but verify that by reviewing your bank statements, hence they are referred to as “bank statement loans.”

  • No-income, verified-assets loans: If you don’t have the income to add to your application but you do have assets the lender can verify, you might be able to qualify for a NIVA loan.

  • No-income, no-assets loans: Almost exclusively for investment property financing, NINA loans are made based on your rental income projections, so they don’t require income or assets.

While every lender will have different credit and asset requirements for most loans, NINA loans are the only loans you’ll be able to find if you only have rental income to support the loan.

3 Things You Need to Know About Working With a Stated Income Lender

Before you start looking for a stated income lender, you need to know if they are right for your investment needs. Review these three key aspects of working with no-income verification lenders.

1. You will need to have the capital for down payments.

Regardless of the type of stated income loan you choose, you will need to have cash on hand to make a down payment. For SIVA loans, you might be able to make a down payment as low as 10%, but a NIVA loan might have down payments as high as 25%.

If you are strictly looking for NINA loans for your investment property, you’ll need at least 20% of the purchase price for a down payment. This means you want to compare your stated income loan offers carefully before you make a decision.

2. You might have higher interest rates and fees.

While stated income loans are convenient for property investors and people who are self-employed, they do come at a price. They are considered higher-risk in most cases, so they generally come with higher interest rates and additional loan fees.

Another consideration with stated income loans is the loan term. Some stated income loans have shorter loan terms, like 12 to 24 months. This can significantly impact your rental income cash flow for the first couple of years.

3. You can use non-traditional methods to support your loan.

If you choose to go with a SIVA or NIVA, you can use alternative methods to prove your ability to repay the loan. This might include submitting your tax returns, or it could include submitting copies of your bank statements or other financial records.

With NINA investment loans, you will be able to use your rental income projections. You’ll want to do some research on the rental market where your property is located to get the most accurate income projections. You’ll also want to consider changes in the property’s value over time.

Tips for Finding a Stated Income Lender

Stated income lenders can be hard to find because of the niche nature of their business. Most commercial lenders, like popular banks and financial institutions, won’t offer them to the general public because of the risk.

This means you’ll need to do a little research to find the right stated income lender. Review these simple tips to narrowing down your loan options:

  • Determine the type of loan you want: Not every no-income verification lender offers every type of stated income loan, so you’ll want to figure out which loan type is best for your needs. You want to search for lenders that can actually help you.

  • Put together your loan support documents: This might be your bank statements, tax returns, or a spreadsheet with rental income calculations. You want to have this handy to see if there are any other supporting documents you might need.

  • Diligently research the market: The most effective way to get approved for a NINA loan is to be able to make a solid case for your rental income projections. The more research you can show, the better your chances of being approved. This will also help you determine the value of your investment.

This takes a little bit of time, but if you spend the time on it in the beginning, you’ll reduce your frustration and make the application process simpler.

How to Choose the Right Stated Income Lender

Now that you have a list of the top stated income lenders, you will need to apply. Start with your top three lenders so you can compare a few offers. You’ll want to compare the APR, length of the loan, any additional loan fees, as well as any other loan requirements.

Choosing the right stated income lender is critical to the success of your investment portfolio and a strong relationship can lead to other investment opportunities in the future.

Looking for a state income lender that can work with your investment needs? Rental Home Financing has loan options that might work for your investment property.

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