Stated Income Loans Going Bye-Bye

For those of us who enjoy the benefits (and carry the burdens) of being self-employed, the need for stated income loans is fairly obvious – its often difficult to fully demonstrate how much money we actually earn in a fiscal year. Stated income loans have been on everyone’s bullseye list as a culprit in the recent subprime mortgage meltdown, but for the good folks who pay their taxes and their bills in a timely manner, stated income loans have been very effective at helping us get into homes that we otherwise may not have qualified for.

So the news: Stated income loans are going away. January 15th is the last day to apply for a stated income loan and February 15th is the last day to open an escrow with a stated income loan. That means that if you have been sitting on the fence waiting to get a loan and buy a house, you have 7 days left. Otherwise, it’s full-document loans or nothing. Full documents means two years tax returns, asset and liability statements, FICO scores, etc.

While I am happy to not be a lender myself (way too much math and time spent at a calculator and a computer) I happen to have a couple of excellent direct lenders whom I work with constantly.

The advantages of using a direct lender:
1. They are not middle men so there are no extra fees padded for their bread and butter
2. They have in-house underwriting so they can tell you in a matter of minutes and hours whether you have the loan or not. Middle men have to send the loan package off to a lender for approval.

I also have a couple of excellent mortgage brokers:
The advantage of using a mortgage broker?
1. They handle a number of loan products and can find the best fit for your circumstances (while direct lenders are limited by the products that their company provides)

With a new President on the way (on January 20th), and some hope and optimism for better days ahead, here is some other important real estate news: Our median home price in California has dipped below $300K for the first time since 2003 – from a high of $505K just 18 months ago. Most neighborhoods have lots of inventory, and sellers are very, very motivated.

We are working with two types of buyers right now:
a. Those who had been priced out of the market but can now finally afford to get in and buy a home or condo (with interest rates at 5% or lower, and these reduced prices)
b. Those who have been wanting to trade up to a larger home or better neighborhood (they are willing to take a “haircut” on the sale of their home, in exchange for getting the new home at a “buzzcut” of a price.)

For example, you could sell your current home for $520,000 instead of the $650,000 it was worth two years ago – but then you can buy your new home for $780,000 instead of the $1.1M it was worth two years ago – you still end up saving significantly on the move-up house, plus have a killer interest rate.

We are committed to making 2009 a terrific year - please let us know how we can help you! We are never too busy for your referrals.