In the world of property investment, financing plays a pivotal role. While traditional institutional lending, such as bank loans, has been the go-to option for many years, a growing number of property investors are turning their attention toward stated-income loans. But why is this shift occurring? The reasons are manifold and compelling.

Stated income loans, often referred to as “no-doc” loans, are a type of mortgage where the borrower doesn’t have to provide extensive financial and tax documents to the lender. Instead, the borrower simply states their income. This simplicity is one of the key reasons why investors are considering stated income loans.

Convenience and Speed

One of the major Advantages of stated income loans is the convenience and speed they offer. Traditional institutional lenders often require a slew of documentation, including tax returns, bank statements, and even business plans. Gathering, submitting, and waiting for the approval of these documents can be a lengthy, time-consuming process. In contrast, stated income loans can be approved relatively quickly, allowing investors to seize timely investment opportunities.

Flexibility

Stated income loans provide flexibility that is often lacking in traditional loans. For institutional lending, your loan amount is determined strictly based on income and credit score. However, stated income loans consider the value and potential profitability of the investment property. This can often lead to a higher loan amount, providing investors with the capital necessary to make lucrative investments.

Ideal for Self-Employed or Independent Contractors

For self-employed individuals or independent contractors, proving income can be challenging. Fluctuating income, combined with complex tax returns, can often make it difficult to secure loans from traditional institutions. Stated income loans resolve this issue, making it easier for these individuals to obtain necessary financing.

Privacy

With stated income loans, there’s less scrutiny of the borrower’s personal financial situation. This increases privacy, as investors aren’t required to disclose as much personal financial information.

In conclusion, while institutional lending still holds a significant place in property financing, stated-income loans offer a host of advantages that make them an attractive alternative. The convenience, speed, flexibility, and privacy they offer make them a preferred choice for many property investors. As with any financial decision, it’s crucial to consider your unique circumstances and consult with a financial advisor before choosing a loan type. To get the funding you need for commercial real estate, contact Pursuit Commercial Finance today.