A Stated Income Mortgage is a mortgage that, although you must disclose your income, you do not have to verify it with W-2s, income tax returns, or pay stubs. The lender just takes your word for it. A mortgage may be either stated income, stated assets, or both. Since "going stated" represents more risk to the lender, lenders usually charge a higher interest rate, discount points, or require mortgage insurance for stated income loans.

Because your income is unverified, many borrowers are tempted to overstate their income to get a larger loan or better interest rate. It is mortgage fraud, a felony crime, to misrepresent your income or any other information on your loan application.

Aside from the legal ramifications of submitting a fraudulent mortgage application and/or supporting documents, a prospective borrower should remember that lenders have spent years developing and refining the underwriting guidelines and pricing models for the various loan products to minimize their risk. Lenders do not want you to default on your loan, they are in the lending business and want your money, not your house.

The benefit to you is that if your loan is denied, or you are offered "predatory" terms, the lender is concerned you are getting in over you head and will more likely default on your loan.