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August 24, 2008
Stated Income Mortgage
I'm self employed and am considering a stated income mortgage. Am I wasting my time talking directly to the bank because my loan is not so straight forward and should I just focus on going to broker? Can you recommend someone who might offer a stated income product (broker or bank)? Thanks.
Comments
I used Rita Mastroberardino at Dearie Mortgage (.com) and she was incredibly helpful. She put together 3 loans for me before we finally got our house, all for one flat fee (under $300). I have a stated income mortgage, but got it 2 years ago, so things might be a bit more difficult now. She was a godsend, though.
Posted by: mshook at August 25, 2008 7:38 AM
I would be surprised if you are still able to get a stated income mortgage at all unless you are putting down a very large down payment and paying a high interest rate. The stated income mortgage, like the payment option mortgage, is one of the products largely viewed as responsible for the housing crisis and is being frowned upon by banking regulators.
Why can't you just provide tax returns? Self-employed doesn't mean you can't verify your income. And if the answer is that your income in prior years hasn't been big enough, should you really be taking out a big mortgage?
Posted by: lechacal at August 25, 2008 7:56 AM
I got a stated income loan right before the mortgage meltdown, and am curious about what happens with this. OP: can you report back to us what happens when you talk to a broker?
FWIW, I did have to provide a stack of Schedule Cs to an accountant, who did write up a notarized "statement of income," in order to get my stated income loan, even back in the freewheeling days of yore. Wasn't exactly a liar's loan--she was basically honest. She just reframed my income information in terms of what I actually live on, not in terms of minimizing tax burden.
Posted by: vanburenproud at August 25, 2008 10:08 AM
mshook- thanks for the suggestion.
vanburenproud - from what you wrote, sounds like our situations are pretty similar. As for what the brokers have told me, the banks are looking for at least 30% down. We can afford that but we're interested in a place that needs serious renovations and that wouldn't leave us with the money needed for renovations. Another broker suggested a 40 year mortgage, with ARM for first 10 years at the prevailing rate, and cap of 5% above the initial rate over the life of the loan for the remaining 30 years. He says I can prepay the principle without penalty. The ideal situation would be to refinance before the 10 years is up at a good rate, but who knows, right? So what do folks think of this financing option?
Posted by: prop351 at August 25, 2008 10:33 AM
I know Astoria has an Alt-A portfolio, but not sure if they are offering this product much anymore. Management has taken some serious flack for this book and they are unlikely to underwrite loans to anyone without ~50% down and a business or jumbo deposit relationship. But it wouldn't hurt to check. Anything that happened in stated income 2 years ago will definitely not happen today. I tend to agree with other posters here. If this is your only option, you may want to work on being able to document and try later. If you can even get a stated income, you will get gouged on the rate.
Posted by: jingle mail at August 25, 2008 10:41 AM
With a 40-year loan, you are basically a renter who takes real estate market risk. That is probably the worst of both worlds right now. If there are any issues with getting a mortgage, why not just rent?
Posted by: lechacal at August 25, 2008 11:26 AM
Nothing wrong with a 40 year mortgage. 30 years is just convention. You probably pay a slightly higher rate, and a little less principle in a slightly lower monthly payment. It's more conservative than an interest only loan. If lenders offer it and the numbers work then keep the option on the table.
Many years ago when I was self employed, I went with a no income check 7/1 ARM. Had a good experience then with Norman Calvo from universal mortgage.
Posted by: Bklnite at August 25, 2008 4:59 PM
With a 40-year mortgage, you have paid off very little principal by year 10. If you are like most people, you will sell before then. The forced "savings" of actually making meaningful principal payments means that it is easier for someone to get out from under a property in a down market (which I think most people think the next 5 years will be). If you are on a 40-year mortgage and prices have gone down, you are underwater very quickly if things go south.
These are things that people should think about when they buy, but after a long run-up in prices everyone thinks they don't really matter.
Ask the Californians who got 40-year mortgages in 2005 whether they are happy they used a new mortgage product to "stretch" for a price they really shouldn't have been able to afford.
My advice - if you are asking these questions, rent. Don't buy into the myth that everyone needs to be a homeowner. You could lose all of your equity in a heartbeat if you engage in stretch financing in this market.
Just my $0.02.
Posted by: lechacal at August 25, 2008 5:36 PM
highly unlikely that you will be able to get a stated income loan in this climate. Talk to a reputable mortgage broker (NOT "deariemortgage.com") but Manhattan, Universal, Apple or Trachtman. But I don't think you can get them anymore. Too bad, 'cause some of us who did lie about our income but know what we could afford were able to get mortgages and buy homes that we have no problem making payments on. (It helps to not spend your money buying crap).
Posted by: Ppark at August 25, 2008 8:53 PM
I merely gave the OP my reputable mortgage broker's web site, since I am too forgetful and lazy to look up her phone number, and the web site address sticks in my mind. I am not the only one I know who has used this broker, and we all had great experiences with her. Cheesy company name, perhaps; helpful and professional woman, definitely.
Posted by: mshook at August 25, 2008 10:13 PM
To clarify--my stated income loan has a fixed, low interest rate over 30 years. I would NOT NOT NOT take out an ARM or any other exotic product in this climate... even though you have found someone still stupid enough to offer one.
If you are looking at places that need serious renovations, in this climate I would suggest:
1. Make sure you can afford payments on the best fixed-rate 30-year mortgage you can get, and don't get a house that is one penny more expensive than what you think you can easily afford.
2. Once you've closed and moved in, don't do anything for six months except save like the dickens and plan. Get a strong emergency fund. Poke around.
3. After six months of planning and saving, do renovations slowly as you accrue cash *over* a six-month emergency reserve fund (three months if you like risk).
The act of buying a house is so disorienting and exciting that it can make you deliriously wasteful. I strongly suggest avoiding this period--it's really bad for your bottom line, and your decisions are bad anyway.
If you can't afford to rent an apartment and keep a mortgage (as I could not), living in an unrenovated house for six months or even a year is not the end of the world. You will need the time to stop buggin', get to know what you actually bought, address actual emergencies like flooding basements or serious leaks, and get a very clear sense of how much the house actually costs you.
The bottom line is that we are in a credit crisis. In this climate, I would not go into debt over renovating a house under any circumstances, and that includes indulging in an exotic mortgage in order to keep a cash reserve for renovations.
For that matter, I would not take any mortgage in this climate that depends upon refinancing to make it look sane. I would not take a mortgage that I would kick myself for in twenty years if I could not refinance. I would not put myself in any position where I had to trust banks right now.
Posted by: vanburenproud at August 25, 2008 11:46 PM
I'd be very surprised if you can get a stated income mortgage through Apple Mortgage.
My wife has just taken out a mortgage through them with Citi.
I've refrained from posting my negative comments about them so far because at the end of the day we did get it.....
But seriously what was promised and what was delivered were two very very different things.
Apart from shopping us around I fail to understand exactly what Apple did on our behalf apart for their $26.850 commision except lose documentation and just generally cause us issues.
I'm sure I'll blog about it sooner rather than later but lets just say the USA has a lot to learn about "frictionless transactions".
Cheers,
Dean
Posted by: deanc at August 25, 2008 11:48 PM
To go stated income you must be looking to put don at least 20%. You must also be able to show reserves in your bank account after you down payment and closing costs. We still have "stated" loan programs availabe. Of course your credit must be excellent as well. There are no promises with stated income loans. The reasonability factor has to be there. sunny_hong@coutrywide.com
Posted by: shong1 at August 26, 2008 12:00 AM
Hi Sunny,
good to know they still exist. we had banks pull all kinds of crazy stunts to say no.
Chase said they wouldn't provide us a mortgage when they realised we owned 25% of the apartments in the building eg. we were buying 2 of the 8 apartments in the building.
They said their limit was under 10% but when we pointed out that with only 8 units everyone owned at least 12.5% ..... they kind of went away quietly never to be heard of again.
Cheers,
Dean
Posted by: deanc at August 26, 2008 12:06 AM
Sunny, if anyone should be refraining from extending this kind of loan right now, it's Countrywide. I'm actually quite surprised you are still allowed to offer the product, and to be frank it might still be on the menu at the loan officer level but would never actually be done. Banking regulators are looking at these products pretty closely right now.
I agree with most of what vanburenproud said.
Another thing to bear in mind, depending on what property you have in mind, it could be a lot cheaper to buy in in a few years.
Signed,
a happy and renter
Posted by: lechacal at August 26, 2008 8:03 AM
Stated Income loans are still available. Not many banks are still offering them. I can actually count on one hand the number of banks. You are going to need good credit and at least 20% down. Banks still have programs for 10% down but the PMI companies will not insure those mortgages so you find yourself in a catch 22.
For clarification Astoria is only offering Full Documentation loans at this time.
Some banks still offer No Doc or NINA loans but at lower LTVs suhc as 65% and higher rates. Programs are still available but you need to know where to look.
That said nothing is easy right now and underwriters are scrutinizing the hell out of loan applications (as they should.)
Good luck and if you need any advice I'm here all day.
Posted by: Adam Dahill at August 26, 2008 10:10 AM
hef
Posted by: what at August 29, 2008 1:06 AM
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