A declared income home loan is an ideal mortgage option for homebuyers who cannot easily verify their income. Traditional mortgage lenders have specific loan requirements. Although borrowers may become frustrated with the whole application process, lenders must protect their investment. If a mortgage is approved, and the borrower is unable to pay the mortgage, the lender will incur fees with a foreclosure proceeding. Thus, mortgage lenders typically validate a borrower's income and require W-2's, paycheck stubs, banking statements, etc.

If self employed, mortgage lenders may be unable to verify gross income. Unfortunately, many lenders do not offer loans to self-employed persons. Furthermore, buyers whose salary is based on commissions may have difficulty obtaining a home loan. In most situations, these buyers have enough income to afford a home loan. Yet, they do not meet the bank's lending requirement for a traditional mortgage. Fortunately, many mortgage companies offer different loan programs. Thus, if a buyer cannot qualify for one particular loan, the mortgage provider can usually recommend a better mortgage option.

Declared income home loans can be ideal for commission-based employees and the self-employed. These loans are available for persons with good and bad credit. Good credit applicants are less risky. Ordinarily, declared income home loans have higher rates because the mortgage provider does not verify income. Yet, if applying with a credit score of at least 680, borrowers may receive a comparable rate. Rarely does a lender offer 100% financing on a declared income loan. The typical loan-to-value is 90% or less. Therefore, borrowers will need at least a 10% down payment. If refinancing, the loan-to-value is 85%.

Even though declared income loans are available to persons with a poor credit history, the loan-to-value is low. Thus, borrowers will need a sizeable down payment. Loan ratios with credit blemishes range from 65% - 75%. This requires borrowers to have more than the traditional 20% as a down payment. If selling an existing property, buyers can use funds from the sale as a down payment on the new property. On the other hand, first time homebuyers may not have the money available. If not, the borrower will not qualify for a declared income loan.

Unfortunately, even if a borrower with poor credit is able to save 25% - 35% for a down payment, the interest rate received on this particular declared income mortgage will likely be higher than average, which results in the borrower paying more for the loan.