Question:

On stated income loans tax returns are necessary or not?

Answer:

When you are doing a stated income loan tax returns will not be necessary. However, the lender will probably ask you to sign IRS 4506 form. In that case, if you default on the mortgage loan rest assured the first thing the lender will do is grab your 4506 from the file and verify your income with the IRS.

If you don't exactly have the income you are declaring, go with a No Income Verification loan. This way you won't have to commit a fraud because income overstating on a SISA/SIVA loan is fraud. And yes, interest rates on stated income loans may be 0.25% higher, or more.

The IRS 4506 may actually stay on file forever - stated income and no income verification loans are a favorite type to loan officers. They won't really have to calculate averages or go through tax returns and W-2s so the 4506 is very likely never to be pulled out. So, unless you give them a reason to check your file (by defaulting on the mortgage) the 4506 may never be used and you won't need to worry about someone checking your tax returns.

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