SISA Loan - A SISA (stated income, stated assets) is a loan program were the borrower(s) state on the application what their income and assets are, but the lender does not ask for documentation for the amount stated.Stated Income, Stated Asset programs are not the same as No Documentation programs. Employment will more than likely be verified.
Stated loan programs can help a borrower acquire property which is in line with their true purchasing power, irrespective of reported personal income. It's an excellent choice for investors.
Often times self employed borrowers will require a SISA loan because they may write off most of their income for tax purposes.
In order to justify the higher risk associated with Stated-Income/Stated Assets mortgages, banks charge higher interest rates on SISA loans than on Full Documentation loans.
SISA loans usually require a higher credit scores. Generally the higher LTV(loan to value)the higher the score needed to qualify.
And because of the higher interest rates you would only use this program when you are in a situation in which this is the only way to get qualified.
Choosing a stated income, stated asset loan does not mean that you will not furnish any documentation to your lender only that documentation will be limited. For example Instead of self employed borrowers providing tax returns you will need to provide a copy of your business license for the most recent two years or a letter from your CPA stating that you have been self employed for at least two years. To state your assets you will need to disclose your bank name or who the asset account is with.
Choosing the SISA loan does not guarantee an approval. The income and the assets that are stated still must be reasonable and is subject to an underwriter's approval.
For self employed borrowers the SISA is a more common as cash flow may show a lack of reserves typically needed for traditional loan programs.
Many conforming lenders do not require IRS form 4506 to be signed at closing when doing a SISA or NINA loan. It is best to check with your lender or broker before closing to see if you are required to sign it.
Stated Income Stated Assets programs sometimes are abused because some believe that income and assets can be exaggerated enabling the borrower to qualify. The program is actually for borrowers who have hard to prove income sources and assets but lenders let them state the true amounts. Lenders usually only let borrowers who have excellent credit history use this program.
Another loan to consider is the NINA (No Income No Asset). The income and assets are not disclosed on the application and not verified. Employment is also stated and not verified on a NINA. Lenders will typically lend up to 95% LTV on these loans with very good credit.
Some loan programs only allow self-employed borrowers to state their income and assets while others allow both self-employed and wage earner borrowers to use this feature.
When a wage earner states their income the underwriter will often use salary.com or other similar resources to determine if the income stated is reasonable.
For a wage earner who needs to have more income stated than what their job allows, comparing the figure from salary.com, they borrower needs to consider going for no ratio product. This program will not state any income at all; thus the underwriter doesn't ask whether borrower makes enough money to qualify for the loan. Usually, this program requires higher FICO score as you try to obtain higher LTV.
Stated Income Mortgage Loans - A stated income mortgage loan is a great mortgage tool for people who cannot verify all of the income that they earn.
With stated income mortgages, when you are filling out the mortgage application you will still need to provide all of your employment information, however that information is not verified through standard documentation such as: pay stubs, 1099s, W-2s, etc. If you decide to use a stated income mortgage your interest rate will be higher due to the added risk the lender takes.
At any point during the processing of your stated income mortgage loan, the underwriter can request income documents still at his/her own discretion. They may ask for income documents if they deem the income stated on the loan application is not consistent with your job or if they do not feel totally comfortable with your home loan application. There are other types of low or no income documentation loans out there such as, no doc. loans, no ratio loans, bank statement loans, and limited doc. loans.
Stated Income Mortgages are ideal for small business owners and those receiving cash tips as a significant portion of their incomes, such as waiters and cab drivers. In many cases State Income Loan may be the only logical loan option as home buyers in these income situations often have difficulty documenting their incomes.
The lender will verify the reasonableness of the income stated for the wage earner is through the Salary.com. If you are at a smaller company, re wording your job title can give you little extra room to state more income if the borrower needs it.
A stated loan is not an opportunity to inflate or falsify your income in order to purchase a more expensive home then you would normally qualify for.
Stated Income Loans do require verification of the existence of your business or employment. Most states have this information available online. If not, then a letter from your accountant/tax preparer verifying your information will satisfy this requirement.
For stated income loans for employed borrowers, lenders will usually verify that the income stated is reasonable for your occupation and experience level.
Stated Income Loan - Stated income loan programs are offered on fixed rate mortgages, adjustable rate mortgages, or on negative amortization mortgages. They do not require income verification.
Some lenders now allow for the borrower to actually document their income with a simple verification of employment from the employer, thus doing away with the need to document W2s, tax returns, and paystubs.
Almost any type of loan today has a stated income feature if needed.
Stated income loans are available for self employed as well as W-2 employees, however many lenders will offer a slightly higher rate for W-2 employees because their income is usually easier to document.
A Stated Income Loan requires less paperwork than normal for approval. The income is stated on the application. Tax returns, w-2 forms, and pay stubs are not required. The stated income should be reasonable for your occupation
Under "No Income Verification" loan programs, also sometimes called "Stated Income" or "No Income/No Asset" programs the applicant's income is not verified by any of these methods. The applicant is qualified from the income stated on his/her loan application.
These programs were initially created for borrowers who are self-employed and may not be able to verify all income from traditional sources such as tax returns.
These types of loan programs allow a credit worthy borrower to access financing through no traditional documentation. There are a variety of programs available. Some programs even allow a borrower to finance 100% of the property value for a refinance or a purchase.
Most lenders also charge a higher rate on a stated income loan.
Stated income loans are very popular with business owners. Since they write-off a lot of their expenses at the end of the year on their taxes they sometimes have very little net-income to qualify for a full-doc loan.
Tailored perfect for business owners and commission based sales people.
Stated income loans are used when a borrower cannot provide income documentation such as paystubs and tax return information. In a stated income loan, the client "states" the amount of income that they make and the position and for how long they have worked. Lenders usually require the borrower be employed for a minimum of 2 years for stated income loans. Also, when you state the income, it must be typical for that job title. You can't have a MacDonald's cashier making $8,000 a month. The stated income must be believable.
Generally a no income, no asset (NINA) loan requires no verification of income or assets. However verification of employment is required and 2 years of same line of work is required. A No Doc loan is a NINA without verification of employment.
Some banks offer borrowers with high credit scores stated income loan programs with no adjustments, meaning the borrowers would not get "surcharged" or penalized for not furnishing proofs of income. These stated income programs offer interest rates that are identical to that of full documentation loans.
Stated Income programs are ideal for those clients with non-documentable income sources. Typically for those who may receive portions of income in cash.
A stated income loan normally requires a slightly higher FICO score to qualify for the same loan to value as compared to a full documentation loan or bank statement program.
If you adhere to certain loan to value restrictions, you may be able to state your income and get the same rate as full documentation when refinancing your home.
Stated income loans are mainly for self-employed and commissioned borrowers. Stated, no doc, and no ratio loans can also be used for tipped employees too. Waiters, waitresses, hair dressers, etc... are all common professions that stated, no doc and no ratio income loans can benefit. With stated loans you state the income you truly make. With a no ratio loan you fill in your employment info. except no income is documented and no debt ratio is calculated. Lastly with a no doc. loan you do not state your employment info. or your income and no debt ratio is calculated. Some of these programs may require you to have a certain amount of money put away somewhere, known as reserves. A high credit score is generally needed for these types of programs, and the less documentation that is required, will usually result in a bigger rate bump for utilizing one of these programs.
There are two common types of Stated Income Programs:
Stated Income Verified Assets Loan: (SIVA) - Loan approval is based on your stated income, credit history, and verified liquid assets (bank accounts, 401k, stocks, bonds, etc.). The Verified Assets should be consistent with the income claimed.
Stated Income Stated Assets Loan (SISA) - This loan has no assets being verified. You only state your income and state your assets on the application. This program may have a slightly higher interest rate because the assets are not verified.
Some variations of stated income include:
1)Reduced Doc - Income and assets are disclosed on the application but income is not verified. Assets are verified.
2)No Ratio - Income is not disclosed on the application and assets are stated and verified.
3)No Income No Asset - Income and assets are not disclosed on the application and are not verified. Employment not stated or verified.
Lenders will look at the "stated" income to verify it is not out of typical range of reasonable income, you cannot state $80,000 worth of income working part-time as a cashier. This has to be an accurate figure of income actually made.
Stated-income mortgages are for people who make the money they say they make, but that amount doesn't show up on the bottom line of their income taxes.
Stated Income loans still must be approved by an underwriter. The stated income must make sense for the employment that the borrower has.
Under stated income programs your income will not be verified but your employment will. No employment verification programs are typically called No Documentation or NINA (No Income, No Asset).
It is crucial that you counsel with a competent Mortgage Broker or Mortgage Planner before entering into a Stated Income program. It is their job to thoroughly investigate all of your options, income sources and figure corresponding ratios in order to recommend the best product. A good mortgage planner has the heart of a teacher, not a salesmen and plays the role of a trusted advisor.
Please don't make the mistake of withholding information or providing inaccurate information that they may need to properly qualify you for a stated income loan. You may be tempted to fudge the numbers a little in order to qualify for that dream home, but this could spell disaster as you may be able to qualify for more home than you can afford.
You may be required to sign a 4506-T that will allow the lender to pull your tax returns if needed. Not all lenders will require this form and your lender will know if it will or will not be.
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 under the law.
They say you can beat the tax man or you can beat the bank, but you can't beat them both. If your income is difficult to document because of commission based pay or revenue from self employment, stated income loan programs are available which enable borrowers with sufficiently high credit ratings to borrow money at competitive rates. Programs are often available to borrow money equaling up to 100% of the value of your home, without the need to verify your income or your assets, or in some cases without the need to verify either.
Stated Income Loans are for borrowers with income sources that are not easily verified through normal channels. So, lenders allow borrowers to state their true income without verifying it. These loan programs are usually for borrowers with good credit and come with a higher interest rate.
Many self employed borrowers take advantage of stated income loans so they do not have to provide tax returns to qualify.
As you move down the line on the different programs, from SIVA to SISA to NINA the interest rate will move a bit higher each time. Depending on your credit scores and LTV (loan to value) you might be able to qualify for one but not another.
Stated income is a very popular form of loan qualifying. As you're probably aware, most successful business owners write off a lot of their expenses at the end of the year on their taxes, causing very little net income to be used for qualifying for a loan. You also see this with borrowers that make tips, bonuses and commission as their sole form of income.
Will Stated Income Work for You? - A stated-income loan qualifies a borrower using the income the borrower states on the application form - as opposed to the income the borrower can document. With a stated income loan, the lender agrees not to attempt to verify the income the borrower has stated on the application.
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 commingled 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 under the law.
With the use of automated underwriting borrowers with exceptional credit that meet other loan criteria can get a stated income loan or no income verification loan with the same interest rates and fees as borrowers who do provide income verification.
For some people a no ratio loan or a no doc loan may be the best route to go (instead of stated income). On a no ratio loan an income figure is not filled in on the loan application and no debt ratio is calculated. On a no doc loan, there is no employment filled in, no income listed and no debt ratio is calculated. These types of loans are higher risk loans and higher rates are usually associated with them. However, some people may have income that an underwriter will not accept for one reason or another and these options may be the better route to go. Temporary disability is usually an income that can not be used. Also a person who jumps around from job to job, has large gaps in between jobs, switches their line of work constantly and has no job stability may consider one of these types of loans.
A stated income loan is a great loan for people who are W-2ed or self-employed. There are also programs that allow stated income and stated assets on the same loan. These programs help to preserve borrower's credit by getting them the funds that need when they need them.
Employment will most likely be verified, the income stated will have to be make sense with the type of job submitted on the application.
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 existence of this loan, is for the purpose of helping borrowers, who otherwise cannot document their Actual Income. It is not designed to fictitiously inflate your income.
Though the stated income loan is an attractive loan for many self employed borrowers, always remember that many of the deductions that you take on your business taxes can actually be factored right back into your income for mortgage underwriting purposes.
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-available salary survey sources like salary.com to determine whether or not the income stated is consistent with the borrower's profession and title.
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