Credit Repair 2016!! – Credit Resolutions

Your credit score is important – it’s time to start treating it like it is. That is, if you haven’t already done so.

Yes, a poor credit score can cost you in higher interest rates – if you even get approved for a loan or mortgage at all. In turn, you can end up paying hundreds, thousands, perhaps even tens of thousands of dollars more over the lifetime of a loan than you would if your score was good.

So if you haven’t already put an emphasis on getting – and maintaining – a good or exceptional credit score, why not start now? Here’s a look at some resolutions to help you in 2016:

Check Your Report

Get into the habit of checking your report at least once per year. Why? Because it’s estimated that some 42 million Americans have some sort of inaccuracy on their report. Get the report, look it over and take the necessary steps to dispute any errors on it.

Lower Your Debt-to-Credit Ratio

Say you have one credit card with a $10,000 limit and you’ve racked up $5,000 on it. Your debt-to-credit ratio is at 50 percent – and it’s likely costing you with a higher score. Generally speaking, the higher your debt-to-credit ratio is, the lower your score – and vice versa. For a better credit score, simply work to keep this ratio at or below 30 percent.

Think Twice Before Closing Accounts

Many people think that paying off – and closing accounts – will help their credit score. That’s not necessarily true. While paying off accounts will help your score, keep in mind that the credit bureaus take credit history into consideration as far as your score goes – so it’s important to have it on your record. Closing accounts can actually impact this part of the score. It can also impact the aforementioned debt-to-credit ratio. So instead of focusing on closing accounts, focus more on paying them down – start with the high interest accounts first.

Simplify Things

Pay all of your bills on time. Keep your balances low. Don’t get carried away with applying for new credit.

Simple enough, right? So do it! Set calendar reminders or automatic payments to ensure your bills are being paid in full and on time. Keep your debt-to-credit ratio in check and only apply for credit when you actually need it – not just to get 20 percent off on in-store purchases or for some other promotional offer. Keep it simple and your score will rise to a point where you’ll likely be happy.

Remove Collections – Once and for All

When you start working on repairing your credit, paying off old debts is part of the deal. But, how you deal with these old collections accounts can have a big effect on your credit score. By approaching your creditors in the right way and securing certain agreements from them, you can get old collections off your credit report sooner and keep them from dragging down your score.


What Stays on Your Report

When you pay an old debt, it doesn’t automatically disappear from your credit report. In fact, a debt can stay on for seven years after you have paid it off, since this was the last time that you had any interaction with this record. While the collection stays on your report, it will show up as “paid” or “settled.”

If you just pay the old debt without making any other arrangements, it will stop showing up eventually. But, in the meantime, it could mean the difference between getting a mortgage and being passed over. Or, you could wind up paying a higher interest rate, which will cost you thousands more over the life of your home loan.


How to remove collections Off Your Report

When you start addressing negative entries on your credit report, it makes sense to contact the creditor to negotiate instead of just writing a check. When you are making arrangements to pay, ask for what is known as “pay for delete.” In a pay for delete agreement, you pay the debt and they remove it entirely from your credit report.

Experts say that about 10% of collection agencies are willing to agree to pay for delete. In general, you will have better luck with a smaller company than with a larger one. A few of the situations where your pay for delete request is most likely to be honored:

  • It’s a medical debt. Medical debts are often now treated differently than other types of unpaid debt. In fact, in the newest FICO scoring models, unpaid medical debts are not counted at all. While the new FICO scores are not yet widely used, they make it more likely that a collection agency will agree to a pay to delete.
  • The original debt is not credit card debt. When a collection on your credit report is related to a big bank, chances are low that you will be granted a pay to delete. Your best bets are debts that are owned to smaller companies.
  • You never got notice of the original debt. If a collection letter is your first notification that you have an unpaid debt, collection agencies are more willing to work with you. Life happens, and sometimes we get surprises when errors are made in a creditor’s system or if you move right when you get a bill.

In any case, you should always ask for a pay to delete when satisfying an old debt. The quick improvement to your credit score is worth the extra effort.


Bad Credit – What do I do?

Bad Credit – Murphy’s Law tells us whatever can go wrong will go wrong. This colloquial advice applies to everything from planning a wedding, pulling off a bank heist, or repairing your credit score. If your credit is low, you’ll want to create an action plan with Murphy’s Law in mind. According to Nikitas Tsoukalis, choosing the right final goal in your action plan is the “single most important part.” Your goal should overshoot a lender’s minimum, so if something does go wrong and you do fall slightly short, you can still be approved for what you need.

For additional information feel free to contact our office at 617-265-7900 or schedule a free consultation below.

10 Reasons You Put it off

Credit Repair Procrastination – Why do we wait?

It’s not uncommon to be afraid to dig into your finances. Many people feel that they don’t properly understand their finances or that it’d be difficult to learn. Not sure what is holding you back? Read on to learn common reasons that people avoid .

Why Are You Avoiding Repairing Your Credit? Credit Repair Procrastination

Still Procrastinating?

1. You think it’s too difficult.

If you did not get a good education in personal finance, you may not know a lot about credit. Luckily, there are many resources to help you learn. Knowing what goes into your credit score can help you predict the outcome.

2. You think your credit doesn’t matter.

If you pay in cash for everything, you may think your credit score doesn’t matter. However, bad credit can affect every aspect of your life from where you can get a job to how much you pay for insurance.

3. You don’t know how much you owe.

Not sure what your debt is? You’re not alone. According to The New York Times, people tend to report in surveys only about half as much as credit card companies say is owed to them.

4. You don’t have the funds to pay off old debt.

A recent study found that, on average, people with delinquent debt owe over $5,000 in credit card debt, past medical bills and other types of debt. can feel impossible if you don’t have the money on-hand to pay back your creditors.

5. You don’t know where to start.

If you’ve never examined your credit, you may not even know how to start to repair credit scores. Look online for credit tips to find out what you owe and how to start debt management.

6. You don’t know what to do about erroneous debts.

Looked at your credit report and found that you don’t know what some of the entries are for? As many as 42 million people have errors on their credit reports.

7. You think you don’t have the time.

can be a time-consuming activity. But, with the help of quality companies, you can outsource some of the leg work while reaping the benefits of a better credit score.

8. You are embarrassed.

Many of us have had debt management issues due to youthful disregard for financial responsibilities or getting in over our heads with credit card debt. But, your bad credit won’t go away unless you confront the issue head on. Credit Repair Procrastination is common.

9. You don’t want a significant other to know.

There aren’t any hard figures on how many people are hiding debt from a husband or wife, but, the issue is common. By confronting your debt and working to repair your credit, you can build a better relationship and better possibilities for your shared future.

10. You feel alone.

Few people talk about their debt issues, so, you may feel like you are the only one who has struggled with bad credit. Caring companies can help you through your struggle and help you overcome any feelings of isolation, while giving you credit tips and the tools to build a better financial future.

For additional information on how you can start repairing your credit, feel free to contact our office at 617-265-7900, or schedule a free consultation below.

marital issues because of debt

Bad Credit Aftermath – How Much it Can Cost You?

How Much Does A Bad Score Really Cost You?

Common sense will tell you that having a good credit score is much better than having a poor credit score, as far as loan approval and interest rates go. But do you really know how much a bad score can really cost you? You might be surprised.

Take a 30-year mortgage for example. Now take a good credit score (680-699), an excellent credit score (740+) and a poor credit score (620-639). Here’s a look at the breakdown of possible costs over the course of a hypothetical $200,000 home loan:

  • Excellent credit (4.025 percent): A likely monthly payment of $958, which equates to an $11,493 annual cost and a $344,798 lifetime cost.
  • Good credit (4.974 percent): A monthly cost of $1,070, annual cost of $12,846 and lifetime cost of $385,368.
  • Poor credit (5.418 percent): A monthly cost of $1,133, annual cost of $13,598 and lifetime cost of $407,950.

As you can see, having an excellent credit score can save you up to $113 per month and $40,591 over just having a “good” credit score over the course of a 30-year mortgage. And an excellent score can save you $175 per month and $63,173 over a “poor” credit score. Hence, taking measures to repair credit before financing such a significant purchase is crucial to your short- and long-term finances.

So just what are some credit tips to repair a poor score?

  • On-time payments
  • Keeping debt within 30 percent of your total credit allotment
  • Having a diversity of different credit
  • Having a lengthy credit history

As if having a favorable credit score wasn’t important enough, the above examples certainly place even more significance on the importance of credit repair and debt management if you’re in a financial bind. As the above examples show, a good credit score could mean the difference of tens of thousands of dollars over the course of a long-term loan. That’s a lot of money that you surely could put toward other purchases and a big incentive to take measures to improve your credit score today.

For more information on how to repair your credit, please contact our office at 617-265-7900 or request a free consultation below.


Bad Credit Score – It Hurts!

Bad Credit: It Hurts!Everyone knows that a good credit score is essential to getting approval for everything from car insurance to car loans—and for getting the best possible interest rate that’s currently being offered—but what many people don’t seem to realize is just how much of a toll a poor FICO score can have on you.

So if you have a poor score, it’s important to take it seriously and enact credit repair, whether it means deploying debt management techniques or implementing good bill-paying habits. Here’s a look at how a poor credit score can hurt you and your finances.

  • High credit card interest rates: Credit cards are notorious for the high interest rates they charge. After all, it is how the card companies make their money. However, if you have poor credit, you can anticipate paying 22 percent and upward, should you even be approved. That’s a far cry from the 10 to 19 percent that’s likely with a good score.
  • Loan interest: How much more can you expect to pay on a car loan with a poor credit score? Possibly up to 2 whole percentage points of interest! Mortgage loans, too, can mean you that you will have to pay potentially tens of thousands more over the course of a loan with a poor score. Repair credit, and take it seriously to avoid these preventable expenses.
  • Miscellaneous: Can you imaging trying to sign up for a cell phone plan only to find out at the store that you’re ineligible because your credit score isn’t good enough? It happens. The same goes with car insurance. Presently, 47 states are permitted to check your credit score to determine the rate.

As you can see, a poor credit score can really hurt! So if yours isn’t satisfactory, make sure you’re taking the proper steps to correct it.

More Insurance Tips

Understanding General Insurance coverage: Suggestion For The Smart Consumer

When it comes to dealing with insurance coverage, it may seem like it is you versus the globe in some cases. With the huge quantity of information available online, it can be almost overwhelming at. This article will certainly offer much practical info for you to obtain begun on the appropriate course.

When you make any sort of improvements to your house that price over a specific amount, you should make sure to call your insurance company and allow them find out about it. If requirement be, many insurance carriers make you state renovations to them that cost a lot so that your plan can be readjusted.

Keep your broker or insurance firm updated on anything that may affect your policy or protection. If they do, then they could propose the next program of activity in concerns to your insurance coverage plan.

When you decide on insurance coverage for your auto, certify your insurer. Evaluating protection, it is additionally in your best passion to look for evaluations on their client solution, case responsiveness and also also rate increases. Understanding which you are dealing with ahead of time can aid you set assumptions with your insurance firm.

Commonly, you will want to get in touch with other client testimonials of specific insurance policy business just before spending your cash in their policies. By speaking with sites like Angie’s listing as well as other such customer remarks, you can acquire a sense of the current popular opinion towards an insurance policy business. If the majority of the firm’s patrons are pleased, that may aid you develop a choice, and also vice-versa.

Have your insurance coverage company reconsiders your scores if your credit history rating has gone up. Insurance business do base component of your preliminary premium on your credit report. Without your consent though, they could just inspect it when they initially supply you protection unless you have had a lapse of insurance coverage. If you know your credit has risen, having your credit rating reconsidered could possibly bag you a reduction in your costs.

When comparing insurance business, the wise customer will certainly take their own loyalty right into account. An insurer that has supplied years of reliable, hassle-free and also reputable service need to not be deserted the instant a slightly more affordable different becomes available. It is fairly most likely that an insurance firm that provides rock-bottom prices is cutting corners somewhere in the solution they provide their clients.

An annual review of their insurance plan is a routine every person ought to exercise. Make certain that all details on your plan is correct and also update it with any type of adjustments. See to it you are receiving credit report for such points as automated seat belts on your automobile policy and safety surveillance on your property owner policy.

In summary, you would like to do all that you can to learn concerning insurance policy. There is a lot of information available, yet we have given a few of the most essential pointers. Ideally we have supplied you with sufficient details to not only provide you a strong background, however additionally further spark your passion to come to be a professional in it.

If they do, then they could recommend the following course of action in regards to your insurance policy. Typically, you will certainly want to speak with other consumer assessments of certain insurance coverage companies just before investing your cash in their plans. If your credit history rating has gone up, have your insurance provider company rechecks your ratings. Insurance policy firms do base part of your initial premium on your credit rating rating. An annual testimonial of their insurance policies is a routine every person need to engage in.

Bad Credit Car Loans: Say No to the Yo-Yo

An auto loan can be one of the easiest ways to build credit. Car loans are granted more easily than other types of installment loans, with one-quarter of all auto financing going to people in the sub-prime market. But, low credit scores and lack of financial education make some people vulnerable to auto loan scams. Financial experts say that people with credit scores of 680 or lower are considered subprime.

Caught on the Bad Credit Car Loan Yo-Yo

Unscrupulous car dealers will sometimes attempt to hook unwary buyers and exhort unreasonable fees and interest rates. The way the scam goes is this: the buyer leaves with the car and a signed contract. But, since most car purchases occur on evenings or weekends, the full paperwork for the loan has not been put through. Then, the buyer gets a call: they were not approved for financing. The dealer offers a new deal, usually with a higher down payment, higher interest and terms that go up to seven years. If the buyer asks to return the car, they are threatened with high “rental fees” for the time they had it, or outrageous cleaning charges. Some dealers even threaten to have the car repossessed or to report it stolen.

Protect Yourself from Scams

The first defense is, if possible, to avoid leaving before knowing that your credit deal is a sure thing. One way to do this is to make your own deal with a bank or credit union for a car loan instead of using the dealer’s lender. Or, get pre-approved for a loan before you shop for a car so that you know whether you will get the credit deal that you want. A pre-approval lets you know how much car loan you qualify for so you don’t wind up looking for something that is out of your price range.

If you do decide to use the dealer’s financing, make sure that you read all paperwork carefully. Do not sign anything that involves conditional terms; these can open you up to a bait and switch.

If a dealer calls you after you’ve left the lot and says that you need to take a more expensive finance deal, ask to see the rejection notice. Often, this demand will be enough to set things back on track. But, if you were indeed rejected, you may need to return the vehicle or agree to the new terms. Should you get a loan that does not work for you, make payments on time and work to refinance later.

And, always be prepared to make different plans. You may do better looking at a used car than a new one. Talk to credit unions and member organizations like USAA to see if you can get a better deal. Most of all, keep educated about your options so that you keep your credit clear and your finances safe.

Marrying Someone with Bad Credit: What changes after “I do”?

What happens when you marry someone with bad credit?

Are wedding bells in your future? One of the concerns that a lot of couples bring to married life is worry about what the other’s less-than-perfect financial history might do to their own credit rating. Luckily, there is not a lot to worry about. There are many things that don’t change after you say “I do” and a few things that do:

  • You don’t become responsible for your beloved’s pre-marriage debt. If they were on the hook before, they still are now.
  • But, you do share responsibility for any new debt in both of your names. This would be true whether you were married or not.
  • Depending on whether the state you live in has community property laws, you could wind up jointly responsible for new debt each of your runs up in your own name after you marry.
  • Do either of you have student loan debt? If you are working to get it out of default or if you refinance, both of your incomes will be taken into account for repayment. This can mean a higher monthly bill than you’d have if you were single.

The best thing that you can do as a couple is have a discussion about your financial situations (complete with FICO numbers) and your philosophies on debt and spending. Getting it all out before you say “I do” can save a lot of “what did I do?!” later.

Apartment Rental Application – How Credit Matters.

Apartment Rental Application & Credit, Apartment Rental Application

Paying Cash

Every now and then, you encounter someone who says that they don’t need credit because they pay cash for everything and they don’t want to buy a home. No mortgage, no credit cards, no need for credit, right? Unfortunately, this view is dead wrong. Your credit score comes into play in a lot of agreements: job offers, insurance rates and, yes, apartment rental applications.
Your Apartment Rental Application & Credit

Apartment Rental

When you put in an application for an apartment, chances are high that you will be asked to submit to both a background check and a credit screening. While they will be most concerned with your rental history, particularly whether you have ever been evicted for non-payment, they’ll take a look at other areas, as well.

Because of the bad economy, many landlords are hesitant to rent to people who have historically had problems paying their bills. It makes sense; if you are unable to pay your rent, they wind up losing thousands of dollars.

This is why building a history with positive records of credit use is imperative. Even if you never want to borrow, you will still wind up in situations where people are taking financial risks on you.

Can You Rent with Bad Credit?

The answer is yes, with some conditions. While you may have some trouble negotiating with large rental companies, they are usually not the only options in most areas. To mitigate the issues of bad credit when renting:

Look for privately-owned properties. If you are dealing with a person who owns a small apartment building or has a house that she rents out, your chances of having to undergo a credit check are lower. Plus, you have a chance to personally explain any smudges on your credit.
Offer a larger deposit. If you have the cash to do so, offer a larger security deposit. This can give a potential landlord peace of mind.
Offer to have rent automatically deducted each month. If your rent is withdrawn automatically from your checking account each month, the landlady does not have to worry about whether you remember to pay the bill.
Work on emphasizing your best features. Have you been at the same job for several years? Are people you rented from in the past willing to give sterling references? This can help.
Get a co-signer or roommate. If you have someone with stronger credit who is willing to vouch for you, it can help stack the odds in your favor.

Work on Fixing Your Credit

While it is possible to rent with bad credit, it’s easier to rent with better credit. Look at your credit report to find the areas where you can most easily improve. Everything from taking off erroneous black marks to building credit history with a secured card can help. Over time, as your credit gets better, you will find that your housing options improve.

For more information regarding our credit repair program please click here to request a free consultation.

Reduced Documentations Loans – Are they back?

Here is some excellent news about a new reduced documentation loan offered by our friend at Guaranteed Rate Mortgage..Nikitas Kouimanis.

Out Line For The Reduced Doc Product Also Known As The Stated Income Mortgage Loan

For more information about reduced documenation loans you can inquire with:

Nikitas Kouimanis, Guaranteed Rate Mortgage

Direct Line: 212-745-9012

The Reduced Doc Loan Program is for self-employed “business owners” only* buying or refinancing, including Cash-Out, their 1-4 family primary home or their one family or condo vacation home. Fixed, ARM or Interest only^^ products are available for this program. Debt to Income (DTI) should not exceed 38/44 with qualification based on using the fully amortized payment.
Maximum financing is:

All ARM Products
65LTV/CLTV up to $750,000 (1-4 Fam & Condo)
60LTV/CLTV from $750,100 to $1M (1-4 FAM & Condo)
50LTV/CLTV from $1,000,100 to $1.5MM (1-4 FAM & Condo)
50LTV/CLTV from $1,500,100 to $3M (1-2 FAM & Condo) All Fixed Rate Products 65LTV/CLTV up to $750,000 (1-4 FAM & Condo) 60LTV/CLTV from $750,100 to $1M (1-4 FAM & Condo) ^^2-4 family homes are excluded from the Interest Only products

Borrower must provide proof (such as a CPA letter) that they are a self-employed owner in an established business for at least two full years and their credit will be a major factor in the approval process.** The DTI ratios should not exceed 36/44 on the RDLP program (on a fully amortized basis.) The borrower must be the owner of an established business entity that can be independently verified by a CPA or some other means. 1099 Independent Contractors do not qualify for this program and often work for one or more businesses but may not actually own the business. Landlords are usually not considered self-employed business owners for this program. All rental income must be verified by leases. The Reduced Doc Program may be combined with a borrower (including him/her) that has a salary or other verifiable form of income on the same application. The S/E borrower states their income confirms business ownership and verifies their liquid asset and reserves are commensurate with the income stated on the application. The salaried borrower lists and verifies their income by traditional means such as W-2’s and pay stubs. The LTV and rates are based on the Reduced Doc Program.
Note: Qualify all Amortized and Interest Only ARM Products at the higher of the actual product rate or the start rate for the NJ 10/1 Amortized ARM

On all purchases the borrower must have the down payment, the closing costs and 12 months PITI reserves in seasoned personal, business or retirement accounts at time of application.
On all refinances the borrower must have the closing costs and 12 months PITI reserves in seasoned personal, business or retirement accounts at time of application.
For all purchases a minimum 35% down payment is required. Liquid and near liquid assets seasoned for two months including reserves must be commensurate with the type of business the borrower owns and the income stated on the application. Assets must be in the applicant’s personal accounts or jointly with any co-borrower to be considered. Assets shared with other family members may not be considered.
Any liquid or near liquid assets used for the transaction should be seasoned and verified with the last two months statements in domestic accounts. Foreign asset accounts are not acceptable.
Proceeds from the sale of a departing residence or other real estate are acceptable for the down payment. However, the reserves requirements should be in personal seasoned liquid accounts.
The minimum reserves for all Reduced Doc owner-occupied purchase and refinance transactions must be at least 12 months PITI. A second home requires an additional three months for a total of 15 months PITI. A non-traditional second
home requires an additional 6 months PITI for a total of 18 Months PITI.
Business assets for the transaction and reserves are acceptable if the borrower is 100% owner of the business and their company’s accountant confirms that personal use of the business funds will not adversely affect the business operations. In addition if business liquid assets are used they should be seasoned the same as personal assets and close attention will still be on the borrower’s personal liquid asset positions.
Gifts, including gifts of equity and a refinance of recently inherited property are acceptable if the borrower has at least 35% of the purchase price or the value of the inherited property plus closing costs and the necessary reserves in personal seasoned liquid funds.

Personal credit use and history are very important. Over extended use of credit will be a concern.
Although FICO scores are not used to evaluate any loan applications, a very strong credit profile including a satisfactory
rental reference or mortgage payment history is required and will be an important factor in the analysis of the loan request.
A strong mortgage payment history means no late payments past the grace period, usually the 15th of the month. This is important. Copies of canceled mortgage payment checks or a detailed mortgage payment history from the lender showing no payments were made past the grace period or late fees paid may be required as documented proof.

A Stated Income Loan is a mortgage where the lender does not verify the borrower’s income by looking at their pay stubs, W-2 (employee income) forms, income tax returns, or other records. Instead, borrowers are simply asked to state their income, and taken at their word.
Reasons For Stated Income Loans

These loans are nominally intended for self-employed borrowers, or other borrowers who might have difficulty documenting their income. Stated income loans have been extended to customers with a wide range of credit histories, including subprime borrowers. The lack of verification makes these loans particularly simple targets for fraud.

Stated income loans fill a gap of situations which normal loan standards would not approve. For example, a standard rule is that a customer’s mortgage and other loan payments should take up no more than 45% of the person’s income. This would seem prudent for a person just owning their main home. However, a real estate investor may have multiple properties and for each may receive only a small amount more than their loan payments on each house, but end up with $200,000 in disposable income. Nevertheless, a non-stated income loan would decline this person since their debt to income ratio would not be in line. The same issue can arise with self-employed borrowers, where the bank with a fully documented loan would include the borrower’s business debt in their debt to income calculation. Stated income loans also help borrowers where fully documented loans normally would not consider the source of income as being reliable and stable, such as investors who consistently earn capital gains. Fully documented loans also do not consider potential future income increases. Another type of loan that uses the same principles is the no income disclosure loan.

In August 2006, Steven Krystofiak, president of the Mortgage Brokers Association for Responsible Lending, in a statement at a Federal Reserve hearing on mortgage regulation, reported that his organization had compared a sample of 100 stated income mortgage applications to IRS records, and found almost 60% of the sampled loans had overstated their income by more than 50 percent.

U.S… Senator Chuck Schumer is currently leading an effort to restrict stated income loan; his Borrowers Protection Act of 2007 would essentially forbid them. A few years later, Chuck Shumer’s efforts came to fruition with the Dodd-Frank Financial Reform Bill HR4173. Within the Bill, Section 1411 has the following excerpt, “A creditor making a residential mortgage loan shall verify amounts of income or assets that such creditor relies on to determine repayment ability…” Currently, lenders are conducting their own version of income and asset verification.

Stated Income Loans are still offered typically by small local banks. Qualification requirements are based on stable employment, good reserves, good FICO and no less than 35% equity position in the property. Stated income loan availability changes state to state, county to county.

They are specifically for Self-employed borrowers only. We do have an investor that will lend to w2 employees but you need to have 50% equity in the home and the maximum loan amount is 1 million. Otherwise this type of loan is the loan of choice for self-employed people. If you are self-employed, it may be difficult to document a regular income. You might make a great deal of money one month only to follow it up with nothing the next. With a traditional lender, it is hard to convince them that you are a good risk. For self-employed people, it represents an opportunity to own a house without getting a regular job.

The pros of this loan are that you have a quicker application process – The process of getting your money is usually faster with a stated income loan. When you apply for a regular loan, they have to review the loan as well as verify everything about it with your employer and document it. With a stated income loan, they can skip this step and get on to lending you the money you need.

Make your own decisions – With a traditional loan banks try to make your financial decisions for you. They have many complicated ratios and formulas that they use to justify a loan amount for you. For example, if you are buying a duplex, they will only let you count a portion of the projected rental income in your income. However, with a stated income loan, you don’t have to worry about whether or not the bank thinks you can afford it. You see the monthly payment and you decide whether or not you can afford it.

The cons of this loan are higher interest rates – As a result of the hassle-free level of faith in you, you will usually be charged a higher interest rate. They are taking a bigger risk by extending this type of loan to you. Therefore, they want to be well compensated for the risk that they are taking. This means more money coming out of your pocket each month and over the life of the loan.

Higher chance of default – While they do not like to admit it, sometimes the bank actually does know what they are doing in the approval process. They have many statistics to back up their decisions to lend or not. When you use a stated income loan, you are eliminating all of these built-in protection mechanisms. When you show them your income, debts, and credit score, they are basing their decision to lend on the history of others in your situation.