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A stated-income mortgage is a “low-documentation” loan in which you’re not required to provide documented proof of your income. You must have verifiable employment, and you must have assets.

Stated-income mortgages are great for small business owners, and people who work on commission or are self-employed. With this type of loan, your income doesn’t have to be proven. The lender takes you at your word as to your stated income, and can only verify whether your reported income is in line with industry standards for your occupation.

Potential borrowers must have a mid- to high-level credit score, and must be able to verify assets. Most lenders require assets equal to six months of the stated income.

It’s possible to get a stated-income mortgage with as little as 5% down, but you’ll pay a higher interest rate. If you’re able to put 20% down, your interest rate will only be an eighth of a point to a quarter of a point higher than that of a conventional mortgage.

Reverse mortgages are loans that are available to elderly homeowners. The loan amount is based on their age and the amount of equity they have in their home, and doesn’t have to be repaid until the homeowner passes away, moves out, or sells the house.

A reverse mortgage can be dispersed in several ways:

1. A line of credit can be extended, from which the homeowner can draw money as needed.
2. A fixed, monthly amount over a short period of time (5 years, for example).
3. A fixed, monthly amount for the rest their lives (or until they sell the home).
4. One lump sum.

The most popular type of reverse mortgage is FHA.s Home Equity Conversion Mortgage. This loan has the lowest interest rates, but also has the lowest maximum amounts you can borrow against the home’s equity. Maximum amounts vary by state and county, ranging from $200,160 to $362,170.

Fannie Mae also offers a reverse mortgage program called Home Keeper. The interest rates with Fannie Mae are a little higher, and adjust monthly. The benefit of the Fannie Mae program is that the maximum mortgage limit is higher. The limit for 2006 is $417,000 and does not vary by county or state.

To be eligible for a reverse mortgage, the borrower must be 62 or older, and the home must be the borrower’s permanent residence. Because there’s no repayment obligation, borrowers need not have excellent, or even good, credit.

More information on the FHA and Fannie Mae programs can be found at their websites:

• HUD/FHA
• Fannie Mae

To understand jumbo loans, you need to understand a little bit about two government-sponsored financial companies - Fannie Mae and Freddie Mac. These two companies buy a tremendous amount of lender-originated loans. This helps keep interest rates down and allows more people to qualify for mortgages. Fannie Mae and Freddie Mac can only purchase loans under a specified amount. Any loan that exceeds this amount is considered a “non-conforming” or jumbo loan. In 2006, for example, the limit was $417,000, so if you want to purchase a home that’s valued above this amount, you may need to investigate a jumbo loan.

Because jumbo loans can’t be funded by Fannie Mae or Freddie Mac, the interest rates are higher, and points may be as well. If you need a loan amount over $417,000, consider splitting the loan. Many lenders will split a large loan amount to help borrowers avoid jumbo loans. You would, in essence, take out two mortgages. The first would be for $417,000 and the second would be for the difference between the first mortgage and the sale price of your home. While the up front costs are higher, the savings are significant as you’re not paying a higher interest rate on the full amount for the full life of the loan.

A graduated payment mortgage (GPM) begins with a lower payment that increases over time. You might, for example, start out with a $950 payment, but it increases by 3% a year for the next ten years. The lower payments can allow you to rebuild your savings after making a down payment, or do some much-needed home repairs if you bought a “fixer-upper.”

The trade-off for the low initial payments, and where some borrowers get into trouble, is that the payments in later years are significantly higher. A GPM on $200,000 at 6.5% starts with a payment of just $941, but gradually increases to $1351 after 5 years.

Despite that, borrowers are qualified on the lower payments. This may not be an issue if you’re only planning to stay in the home for a few years. But if you intend to stay in this home for a while, you need to carefully consider whether or not your budget can handle the increased payments.

You’ll pay a slightly higher interest rate on this type of loan as well, because it’s riskier for the lender. Payments are lower at the start of a GPM because you’re not paying the interest. Consequently, your loan balance increases for the first few years, and may exceed the appraised value of the home. If you default on the loan at this point, the lender looses money.

Because of the risk for both you and the lender, we recommend considering other options first.