Stated Income Home Equity Loan FAQ

What are stated income home equity loans? They are a way to get financing without paperwork. The reality is that no matter how high your FICO score is  (Free FICO® Credit Score Estimator) there is still trouble should you not have sufficient financial papers to prove you have enough income. That is where stated income home equity loans come in. Here are four FAQs about this subject:

How does it work?

What happens is that the person looking to get the money tells the loan company how much they anticipate making in monthly income. They will in turn use this while doing a credit check. You need a high FICO score to qualify for one of these loans (click here for Fico Scores/Reports). This is because they are already assuming more risk in the first place by giving financing without paperwork. Therefore, to limit it they want people with a good financial background.

How many kinds of home equity loan line of credit financing are there?

There are two. One is SIVA. This is where you do not need proof of income, but you still have to show your assets. This reduces the risk to the loan company a little, and therefore the mortgage interest rate will be lower. If you do not have paperwork for the assets either, you will have to go for what is known as SISA. The interest rates will be higher, but if you do not have the paperwork, this is your only choice.

Does the loan company attempt to verify your income?

Yes they do. First, as mentioned, they look at your FICO score to ensure you have a sound financial past. In addition, they will generally get in touch with the company you work for, to verify you indeed work there, as well as your income.

However, if you work for yourself, they will not just let you off the hook. Often times they will look at your line of work, and then find out the average income for that business. If you state that you are making more than that, they will generally not give you money.

What are the drawbacks of stated income home loans?

Obviously, they might sound like a free pass, because you do not need paperwork. The negative is that the home equity loan rates are higher, as you might expect. This is because the company is taking a bigger risk, because they cannot verify what you are earning. Therefore, make sure to shop around before choosing anyone to find the best home equity loan interest rate.
In conclusion, a stated income home equity loan can be your only choice if you do not have the right paperwork.