A so-called “Stated Income” loan, also known as a “Limited Documentation” loan.

• A Stated Income loan is designed for borrowers with excellent credit and/or established employment in the same business (two years minimum).
• A stated income product is available as either a Full or Limited Documentation loan. Limited Documentation loans do not require verification of income. Qualifying ratios are calculated on the basis of figures obtained from the loan application. The borrower’s stated income is considered an estimate based on either the previous year’s income or projected income for the next 12 months. Stated income should be consistent with income typically derived from the borrower’s occupation. It is assumed that stated income is the upper estimate of the borrower’s actual income. Qualifying ratios are based on the borrower’s estimate of income (stated income) should generally be below maximum acceptable qualifying ratios.
• My loan officer will ask how much monthly gross income I earn and recorded that monthly gross income in “Section V—Monthly Income and Combined Monthly Housing Expense” of the Uniform Residential Loan Application.
• My loan officer will submit my loan application to a lender for consideration based on my statements and the lender’s qualifying guidelines.
• A Stated Income loan is NOT designed to allow for declaring inflated monthly gross income merely to qualify for a loan.
• Some lenders require that the borrower sign a Form 4506 with loan documents.  This form allows the lender to reference my Form 1040’s to verify that the monthly gross income I stated is in fact equal to the annual gross income I reported to the Internal Revenue Service.
• Even when a Form 4506 is not required, a Stated Income loan should be used only when monthly gross income actually supports the proposed monthly mortgage obligation and all my other debt.