A stated income mortgage is where the lender does not verify the borrower’s income by looking at their pay stubs, income tax returns, or other income documentation.
Instead, borrowers are essentially asked to state their income, and taken at their word.
These loans are intended for self-employed borrowers, or other borrowers who might have difficulty documenting their income using conventional means.
To offset their additional risk, stated income mortgages often come with higher fees and/or higher insurance premiums. The rates are sometimes higher rates as well.
(Partial source: Wikipedia)
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