After the great recession in 2008, most stated income programs were discontinued, which previously were the solution for documented income challenged borrowers.
There are solutions for these borrowers, however.Certain programs do exist that offer alternative income calculation methods. There are asset-based mortgage programs that allow borrowers to use their liquid assets instead of adjusted income to qualify for a mortgage.
With this type of program, lenders can use the total amount of assets from liquid accounts, including checking, savings, money market, stocks, bonds, IRA’s, 401(k)s, etc. If the loan is a purchase transaction, this calculation of available assets is after subtracting the down payment and closing costs needed to close the transaction. The lender then applies a mathematical equation to the liquid assets for academic and compliance purposes to ensure that the lender is making a fair and responsible lending decision about the financial capacity to make the payments for the new loan.
Numerous solutions exist for borrowers who find themselves in this circumstance. The way these assets are held can also impact how much a borrower can qualify for, in other words, the imputed income calculation the lender applies can vary depending on the structure and nature of the assets. Borrowers of retirement age also have options on how they can utilize their retirement assets and distributions for income to qualify for a mortgage.
Borrowers who find themselves in this position benefit greatly by consulting a loan officer who understands these nuances and can provide insights and guidance in this process. Other programs altogether may be available that can solve the needs of these borrowers whose documentable income is limited. The bottom line is that even though income may be limited, other factors can come into play allowing borrowers to obtain mortgage financing.
