Stated commercial or stated income loans are loans in which an applicant just tells the lender how much money he or she makes without providing the normal documents needed to verify income. These loan programs are used to allow applicants to take unverifiable income into consideration when applying for a loan. Here are some examples of income that individuals may earn that may not be verifiable to qualify for a full document commercial loan.
Over-the-counter income: Many individuals get paid cash for their goods and services. Among those who receive cash payments are those who own small businesses, door-to-door sales people and people who work for small businesses.
Child support recipients: Sometimes, people receive child support from ex-spouses without having to go through the court system. These child support payments might come in the form of personal checks or cash. If the recipient does declare this income on their tax returns and there is not a court order to show that it is owed then lenders may have a difficult time using it to help qualify for a full document commercial loan. However, if the child support amount is substantial, this money might be a major contributor to mortgage payments.
Sporadic income: Some business owners or commission-only workers have sporadic income; they may earn a substantial amount of money one month and nothing for several months. This may make it difficult for them to qualify for a traditional commercial loan.
Stated commercial loans may be used in a variety of business scenarios, including the purchase or improvement of stand-alone retail or office buildings such as supermarkets, drugstores, bakeries, beauty shops, and those found in most strip malls or community shopping complexes. In addition, this type of loan is also used to purchase or improve mixed-use apartment buildings, warehouses, self-storage facilities, automotive shops and service locations.
Stated commercial income loans are great because they address and overcome many typical lending problems experienced by individuals who have commercial real estate or are looking to purchase commercial real estate but don’t have the ability to prove the income to afford the property.
There are people who take advantage of stated commercial loans and lie about their income in order to qualify for such loans; this makes the rates on these types of loans more expensive as it increases the number of defaults lenders incur.
If you need a stated income loan be sensible and truthful about your income and only borrow what you can currently afford to pay.
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