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Stated Income HELOC

Updated on July 10, 2010

Stated Income HELOC for the Self Employed

A Stated Income HELOC is one of the most popular types of loan applicable for self employed people wanting to acquire a home equity line of credit also known as HELOC. Proving how much a person earns through necessary documentation is time and again a complicated thing to do for those who own small businesses and declare themselves self employed. Applying and getting approved for a loan is so much easier and faster if you can provide essential records that is needed to verify your state of income, but what happens to those who can’t? They apply for stated income home equity line of credit.

Finding a lending company that will offer you stated income for your HELOC is not a very easy thing to do. This particular type of loan application permits the borrower to declare their income without the need for documentation to prove it. Due to the lack of documentation to confirm the borrower’s income, lenders may display caution in approving this type of loans. Having higher risks attached to no doc mortgage loans will increase the possibility of elevated interest rates which are usually premeditated to accommodate such risk.

What You Need to Know About Stated Income HELOC

Interested borrowers who want to apply for a home equity line of credit with stated income needs to understand what it is and how it works. First, a home equity line of credit or HELOC is a secured type of loan that is protected by the equity on your home. It is like having a credit line protected by your home equity funds. That is why it is very crucial to know the real value of your home before you enter any remortgage deals.

With a Stated Income HELOC, you only pay the interest which is calculated from the amount that you borrowed. You can apply for a loan amount not exceeding your maximum limit as many times possible as long as you pay each loan first before acquiring again. Let’s say, the maximum limit of your home equity line of credit is $100,000, as long as you don’t exceed this amount you can borrow as many times over right after the interest rate on the first loan has been paid off. For example, you borrow $20,000 out of your maximum limit; you only pay the interest of that amount and borrow again once you have that paid.

Understanding Home Equity Line of Credit

The reasons used to apply for Stated Income HELOC varies from every borrower. Some people use it for unexpected major expenses like hospital bills and some for constant expenses such as college tuition or home improvement projects. There are many factors that you need to be aware of before you enter this particular type of loan and one of them is having yourself vulnerable for reticent decline of prices on real estate that may risk the value of your home equity. Put in mind at all times that the higher your loan amount is, the higher the interest rate will be and repayment of the interest rates maybe dragged to an even longer term.

Know your option on a fixed rate loan if you intend to borrow for a higher amount. You can always seek out valuable recommendations from a reputable remortgage broker on how to avail fixed interest rates. Looking for the lowest permanent rate possible is a best thing to do before you decide on any loan application. Nevertheless, be wary about these very low rates which are used to tease you just to get you sign that contract.


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