The Risks and Dangers of the Stated Loans
Posted by fybmanager20 at March 29th, 2011
It may come as a surprise for so many people, but the stated income loans will not work out all right all the time. Sure, it may be seen as a perfect way to get some badly needed money to pay for new houses. However, there are still certain repercussions that you have to face with the debt instrument. In the first place, what are the stated income loans? These are the debts that will be used mostly in connection to the mortgage lending. Some lenders will feel secure with the debt as they will be holding on to the deeds of the land and lot they are technically paying for.
On the part of the borrower, there are still some disadvantages that you have to consider. Now, current mortgage rates for the stated loans are considerably higher. This is the first major disadvantage. You may be getting fast access to money to buy a new house. However, in the long run, the rates for the interest charge may cripple your financially stability. The reason behind is that lenders do not want to end up with a piece of land that they cannot even resell at a loss in the future. As much as possible, lenders want to earn their own profits right away.
Another disadvantage of the loan is the requirement of the lender of a higher down payment to the debt. This will be seen as a way to again gain some income on the loan even before the borrower starts to pay. The recent crisis involving the mortgage industry is what is driving these institutions to have a sense of cautiousness they never had before. This means that any savings and assets you have will be invested in totality to the real estate property you have.
An issue that has also been raised with the funds is that borrowers will have the tendency to over exaggerate on the stated income. It is never recommended that a person will have to falsify the statements in order to get full value for their applied principal amounts. There is that underlying rule that states that house payments and mortgages should always be nothing more than 28 percent of the monthly income taken in gross. In addition to these cons, it has been known the stated income loan is now also seen as a rare product offered by these lending institutions.