Most borrowers are familiar with a qualified mortgage (QM) loan requiring them to undergo a difficult approval process based on credit scores and extensive income documentation. The stated-income loan is an alternative option for business owners who don’t have the standard documentation needed to obtain a mortgage. These loans were nearly extinct due to the risk and the crash of the housing market, but they’re slowly becoming available again.
What Do You Need to Apply for a Stated-Income Loan?
Many small business owners may have done “cash only” business, or don’t have the W-2s and tax documentation required for a QM loan. Even though they can afford the mortgage payments, they fail to qualify on paper. This is where a stated income or no documentation loan becomes necessary. Finding a lender who offers these options can take some search engine dedication, and it’s important to have these things on hand when you’re ready to apply:
- At least 12 months of both business and personal bank statements
- Your current credit report showing your ability to repay lenders
- Visible account balances reflecting the amount needed for a 20% down payment
Qualifying for a Stated-Income Loan
Prior to applying for a stated income or no documentation loan, you’ll need to start doing the following:
- Cut Back on Tax Deductions: Taking every tax deduction available to you as a business owner can make the amount earned seem like a fraction of your actual income. Take fewer deductions as a way to prove that you’re making the money reflected by your bank statements.
- Separate Your Business and Personal Accounts: Make all purchases with the business account in order to demonstrate financial stability in your personal bank statements. The ability to separate your personal and professional finances shows that your business can sustain itself and is profitable enough to support you as well.
- Plan Ahead: Make sure that you wait to apply for a stated-income or no documentation loan until your business has been profitable for at least two years. The more stability you can show, the better.
For more information and professional advice on securing a stated-income loan for your business, contact the experts at Skybridge Capital Group today.