3. Stated income loans are back. These don’t require tax-returns to prove income, but they’re also tougher to get than in the boom days, when they were given to people with no or few financial resources and dubbed “liar loans.”
“I am starting to see lenders advertising stated income loans, which will be helpful to so many self-employed borrowers,” says Christine Donovan, a real estate broker at DonovanBlatt Realty in Costa Mesa, Calif. “The rates are not great, and it requires higher down payments, though it seems like a step in the right direction.”
Stated income loans are important to self-employed homebuyers because they tend to have fluctuating income and frequently write off expenses, she noted, which can make it more difficult for them to qualify for a mortgage when tax returns are required.
4. Subprime loans are emerging again, but with a change. Before the housing crash, some lenders provided interest-only loans to people with bad credit and no collateral. Lenders entering the subprime market now, however, tend to require hefty down payments from borrowers, who may have healthy incomes but went through a short sale or took another credit hit before rebounding.
“We are getting more calls and solicitations from newer lenders that are pushing subprime-type products,” says Dennis C. Smith, co-owner of Stratis Financial Corp., a Huntington Beach, Calif., mortgage firm that does not offer them.
