Stated income mortgages are ideal for the self-employed and for home buyers in professions with salaries comprised mostly of cash tips, such as waiters and hotel porters. This type of loan applicants can often afford a mortgage, but don't have the necessary pay stubs to document their true earnings. Self-employed business owners whose personal assets are comingled with the business assets often utilize "Stated-Income Stated-Assets" mortgage programs.

You are responsible for providing an accurate figure when the loan officer ask's for your income amount. The loan officer should not coach you or fill in the amount for you. If the loan is audited and fraud is discovered you and or the loan officer can be held accountable uner the law.

One of the reasons for a stated income loan is to minimize paperwork during the loan application process. A number of requirements that would normally be requested are W2 Statements, 1099 Forms, Bank Statements, and Pay Check Stubs. A stated income loan would not require the borrower(s) to find and organize this information to be approved for a loan. In many cases the interest rate difference is very minimal but normally slightly higher than a loan which requires proof of income.

On some stated income programs, the lender may require the borrowers to complete and sign Internal Revenue Service form 4506. This form gives the lender permission to access past and future tax returns of the borrowers. Having a signed and completed 4506 form in the file greatly enhances the marketability of the loan to the secondary market.

Some times this loan program has been referred to as "The Liars Loan". It is important to understand, the existance of this loan, is for the purpose of helping borrowers, who otherwise cannot document their Actual Income. It is not designed to ficticiously inflate your income.

Stated income may be used in lieu of full documentation if you have higher credit scores. Lenders view you as less risky and therefore are willing to dismiss income documentation to speed up the loan process. The rate you receive is contingent on specific loan to value and/or down payment restrictions.

Lenders will often check with widely-availalbe salary survey sources like salary.com to determine whether or not the income stated is consistent with the borrower's profession and title.