How do Stated Income Loans work?

Stated Income Loans are back in the real estate market again and this is turning heads of both the investors and the commercial real estate loan lenders. Is that a good news for commercial real estate investors? It can be! In fact, for borrowers who are self-employed and who cannot show a consistent cash flow pattern to lenders in order to get their loan request approved, stated income loans being back in the market is a great news! Borrowers no longer have to worry about being turned down by the banks and other conventional lending instructions. Stated income loans are the best safety net for any investor borrower who cannot find other forms of financing for their commercial real estate property. So, what are Stated Income Loans and how do they work? Here's a brief. 

What are Stated Income loans? 

Stated income loans are commercial real estate loans that are provided on the basis of income stated by the borrower, requiring a much lesser time period for processing and very little documentation. These loans were made illegal to be issued by lenders after the housing market crash of 2008 and the Frank-Dodd Act of 2010. However, they are back in the market now with a few changes in their approach to ensure that such a crash does not happen again, and in the best interests of both lenders and borrowers. 

How do Stated Income Loans work at present? 

Stated income loans are back and that's definitely great news for every self-employed borrower and other borrowers with poor credit scores who cannot get other forms of financing. However, they are not back just exactly how they used to be. That is, stated income loans are no longer given solely on the basis of the income that is "stated" by the borrower. Rather, such loans are now provided based on the bank statements of a borrower that proves that a particular borrower has the loan repaying ability and thus a lender can safely process the loan request. 

Thus, although heavy documentation and stringent verification of income are not needed, lenders still look for income proof on the basis of the bank statements provided and thus the Stated Income Loans are now provided under the name "Bank Statement Loans", meaning loans that are provided on the basis of the bank statements submitted. 

Stated income commercial lenders typically require the borrower to submit the bank statements concerning the transactions dating back to 2 to 3 years. If a borrower can convince stated income commercial lenders about repaying the loan based on bank statements, there's a good chance loan request will be approved.