Income: Stated vs. Full Doc Loan Processing.
Written by:
Angelina Johnson,
NAMP Volunteer Writer
Why stated income? Believe it or not, lenders developed this process to simplify loan applications - saving time in underwriting and paper-reduction as their objective. Underwriters like to see a stated file but caution on the amount of income in the application.
Though stated means you can dictate the income of the borrower, it must be within reasonable range. A borrower who is lettuce picker, for example, making $5,000 a month is deemed unreasonable. You may consult http://www.salary.com/ for more information.
As full docs had long been an industry standard, borrowers seem to hesitate providing Tax Returns. After an underwriter review the income documentations, it is common for income to fluctuate. Borrowers are given the most amount underwriters can justify. Some borrowers, especially self-employed, might be well making over what they need to qualify and eventhough full docs get lower interest rates, they may opt to go stated simply because they do not want a third party scrutinizing their inch-thick income docs. Other good candidates of stated income are lawyers, doctors, and people with multiple corporate interest and the like.
Some lenders will accept Verification of Employment as basis for full docs. Borrower must be salaried employee and company must be listed in the local business directory. Phone verification is always done as part of the Quality Control ( Q.C.) lenders do.
Stated or full docs, you must verify the consistencies of the income either with third party verification (website above) or income docs provided. Borrowers' desire to get lower interest rate may also play a role in your final decision.
About the Writer. As one of NAMP's volunteer writers, Angelina Johnson is currently a NAMP member in good standing and has applied for her CMLP certification with NAMP. Feel free to email Angelina at: angelina@mortgageprocessor.org. Or, if you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.
Angelina Johnson,
NAMP Volunteer Writer
Why stated income? Believe it or not, lenders developed this process to simplify loan applications - saving time in underwriting and paper-reduction as their objective. Underwriters like to see a stated file but caution on the amount of income in the application.
Though stated means you can dictate the income of the borrower, it must be within reasonable range. A borrower who is lettuce picker, for example, making $5,000 a month is deemed unreasonable. You may consult http://www.salary.com/ for more information.
As full docs had long been an industry standard, borrowers seem to hesitate providing Tax Returns. After an underwriter review the income documentations, it is common for income to fluctuate. Borrowers are given the most amount underwriters can justify. Some borrowers, especially self-employed, might be well making over what they need to qualify and eventhough full docs get lower interest rates, they may opt to go stated simply because they do not want a third party scrutinizing their inch-thick income docs. Other good candidates of stated income are lawyers, doctors, and people with multiple corporate interest and the like.
Some lenders will accept Verification of Employment as basis for full docs. Borrower must be salaried employee and company must be listed in the local business directory. Phone verification is always done as part of the Quality Control ( Q.C.) lenders do.
Stated or full docs, you must verify the consistencies of the income either with third party verification (website above) or income docs provided. Borrowers' desire to get lower interest rate may also play a role in your final decision.
About the Writer. As one of NAMP's volunteer writers, Angelina Johnson is currently a NAMP member in good standing and has applied for her CMLP certification with NAMP. Feel free to email Angelina at: angelina@mortgageprocessor.org. Or, if you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.
posted by Editor in Chief at 10:02 AM
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