Income
Stated Income: Definition & Example
What Is Stated Income?
Stated income is the income an applicant reports on an application without supporting documents, relying on their own word rather than pay stubs, tax returns, or bank records.
What does stated income mean?
Before 2008, many mortgages were made on stated income, sometimes called "liar loans." After the financial crisis, federal ability-to-repay rules generally require mortgage lenders to verify income with reliable third-party records.
In rentals, stated income is the number an applicant writes on the application. Landlords usually compare it with documents or other evidence, because stated income alone is easy to inflate.
Some non-QM mortgages and business loans today use alternative documentation, such as 12 or 24 months of bank statements, instead of tax returns. These are sometimes loosely called stated-income loans, but they still document income, just in a different way.
Stated income example
An applicant writes $6,500 per month on a rental application. His bank-connected report shows payroll deposits averaging about $3,900 per month in take-home pay, which is consistent with roughly $5,000 gross. The manager asks about the gap, and the applicant explains that he included a one-time bonus.
Related terms
- Documented IncomeDocumented income is income supported by records such as pay stubs, W-2s, tax returns, bank statements, or benefit letters, as opposed to income an applicant only states.
- Proof of IncomeProof of income is documentation showing how much money a person earns, such as pay stubs, tax returns, bank statements, an employer letter, or a benefits statement.
- Bank Statement AnalysisBank statement analysis is reviewing a person’s or business’s bank transactions to estimate income, spot recurring expenses, check balances, and flag risks such as overdrafts or unusual deposits.
- Income StabilityIncome stability describes how consistent a person’s income has been over time, based on how regularly it arrives and how much the amounts vary.
