Good Credit Means More Options
By Janet Meyers
05/10/2006
Often when you apply for a new or refinanced loan, you’ll need to supply 2 years’ W-2 tax returns plus pay stubs. But what happens if your stated income is not necessarily what you make? You could be a salesman who works on commission with an income that fluctuates month to month. Or you might be a business executive who depends on annual bonuses for a substantial part of your income. Whatever your reason, if you have good credit with a history of paying bills on time, you may qualify for special loan programs that don’t require quite so much proof of income.
A stated loan program is designed for people who are in this very circumstance. Not all banks offer this program, and an inexperienced mortgage broker may not be aware of it. Basically, if you have A-minus, A or A-plus credit, you stand a good chance of qualifying for a stated program. Simply put, you merely state how much you make in a calendar year on the application, and no paperwork is required. As long as the income is on par with what people in your industry typically make, you should be good to go. Obviously if you make minimum wage, do not claim triple your income to qualify for a loan you can’t afford to repay.
Because this is a slightly higher risk loan, banks will charge you extra for it – perhaps three-quarters of a percent more. But, you’ll get your loan without all the hassles.
A stated asset program is very similar. Usually, lenders require cash reserves to cover several months of payments due to unexpected circumstances. Assets can be in the form of savings, stock and retirement accounts. If your credit is good enough, you can simply state these assets on the application, rather than providing all the paperwork. Again, it’s a little more risky to your loan provider, so you’ll pay a premium.
One last point to consider, is that you don’t know until you ask. If you’ve got excellent credit, you should be rewarded for it. Some banks may give you a .25% credit bonus for your good rating. If you don’t ask, a broker may pocket this for himself as an added bonus to his commissions. This could mean many thousands of dollars in savings over the life of the loan.
The easiest way to build your credit is by maintaining several credit cards with balances and paying them on time every month. Be sure to check out these special offers for credit cards.
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