Stated Income Financing: Beyond Traditional Loans
For individuals in the commercial real estate field, securing loans through traditional channels can be challenging. Banks and similar institutions require tax returns and proof of a steady income. Since commercial real estate involves property sales or revenue from rent, most commercial real estate investors cannot meet the requirements for traditional loans. Stated income financing offers a means to sidestep the strict requirements of bank loans, while providing ample funding for commercial real estate transactions.
Issues with Traditional Loans
Traditional loans for commercial mortgages require proof of employment and a regular salary drawn from a company. Even if commercial real estate investors operate under a corporate structure, revenue is rarely even. Property sales do not happen on every Friday like clockwork. Even rent, due to turnover in tenants and other factors, is rarely the same amount every month. Additionally, most commercial real estate investors take advantage of tax benefits to lower the amount they have to pay on their income tax forms, so the amount shown is not indicative of the revenue made in a given year. Stated income financing provides a workaround to the red tape of traditional lenders.
The Advantage of Stated Income Financing
The main advantage behind stated income financing is that it allows commercial real estate investors and property developers to secure financing without tax returns. This does not mean that someone can walk in and claim to make any amount and expect commensurate financing. Documentation must be presented to support the request; such as bank statements. Bank statements offer proof of revenue generated from commercial properties, and help to get approval for a commercial mortgage loan through stated income financing. A letter from your accountant, and other documentation will also serve as proof of self-employment, and a decent credit rating can help to expedite the entire process.
Using Stated Income Financing
Stated income financing is usually used for large property acquisitions, for which traditional loans would take too long to process. Stated income financing can be arranged efficiently with fast closings to allow commercial real estate investors to take advantage of time-sensitive opportunities. At CounselPro Lending, we specialize in financing solutions for commercial real estate investors. If the prohibitive requirements of traditional lending channels are preventing you from getting the funding you need, contact our office and learn how stated income financing can work for you.