It wasn’t all that long ago that there was the “perfect” loan for people who were small business owners and had very little income according to their tax returns.
These stated income loans had all different kinds of names – most of them sounded pretty cool at the time. NINJA, NINA, STATED, NO DOC, LOW DOC and I am sure quite a few other names — just to name a few. There wasn’t a week that went by where some lender somewhere didn’t come out with a new loan for some market segment that up to that point was unable to obtain financing.
Had bad credit?
No problem – there was a loan program available for you.
Didn’t have any income?
Again, no problem — there was a loan program for you too.
Just filed bankruptcy?
Yep, there was a loan program for you — as long as you were at least one day out of bankruptcy.
And then it all changed.
Almost as quickly as they came, the various loan programs with cool sounding names went away.
And although there are many factors as to them going away, perhaps no factor was as big in the elimination of stated income loans as the 4506T.
The 4506T is a document that allows the lender to go and pull your tax returns with the IRS for the last few years. Prior to only a couple of years ago, virtually no lender required that you signed the 4506T when applying for a loan. Now, I am not aware of a lender who will give you a loan without a signed 4506T on file.
And although that isn’t the only reason that stated income loans went away — it is one of the biggest. Now, rather than just making you provide your income documentation prior to underwriting your loan application, most lenders now require that you also sign the 4506T so that they can actually verify that your income is correct.
And I think it was one of the wise-old-Presidents who once said: