However, if you truly are making $30k a year and the loan officer is encouraging you to report $75k a year, we have a problem, a huge problem. Either way, keep in mind that the first thing that you and your mortgage consultant need to consider is what monthly payment you are comfortable with. Then build the mortgage around that and see what you can afford, see what you can qualify for, and get that loan! Happy hunting!
Lenders use the current income of a salaried worker even if they just got a big raise yesterday. Lenders use the two year average income of an hourly paid employee ,and do not offer the same consideration to someone who just received a big increase in their hourly wage.
To some extent one could view that as a discriminatory practice against hourly paid workers. I have seen this with a Boeing Employee who has worked for Boeing for 20 years. Clearly he should have the same advantage afforded salaried wage earners, and not be penalized simply because he is paid on an hourly basis.
In that case I would say that stating your income at what it is, and not relying on a system that makes you average two years back, is likely a fair and good use of "stated income" for loan purposes.
Likewise if you have just raised to a level in your company where you will be receiving bonus income in the future, that you did not receive in the past.
The only reason to use stated income is if your REAL income is higher than the lender is considering under their normal guidelines. That is the purpose of there being a "stated income" vs. "fully documented" option.
So if it is true that you income is higher than records would show, then yes. If you are asking if it is OK to lie...well, that's pretty obviously a no.
If your self-employed and you take a lot of non-cash deductions on your tax return (depreciation, mileage deduction, non-cash donations to charity), you probably don't make much money on your tax return but do keep a lot of your cash. If you understand what your cash flow situation will be post purchase, and are comfortable with the obligation, than go for it. Realize that if you fall behind on a payment or default and the bank decides to pull a copy of your tax returns to verify income, you could be charged with fraud. Don't over extend yourself. Err on the side of conservatism, and keep 6-12 months of PITI in reserves.
The IRS 4506-T that a lender will require at closing will prove that the income was overstated in the event of default. Technically they are not supposed to pull your taxes unless you default - but one late payment can create the lender's desire to double check the facts.
Stated Income is a convenience for people that either don't keep their books well or for professionals who have seasonal/sporadic incomes like Salespeople. It just smooths the numbers out.... it does invite some creativity in those who are less than ethical... but the actuality of it is that it was not meant for sheer lying.
One good use for this is to compensate for cash income or side income that is not reported... I know - we all report every dime! ... but say you have some side income that your accountant tells you does not apply to your taxes... and this is steady work. Police often bounce bars, bodyguard, do security or work at liquor stores after their shifts. At Bars, they may get tipped out by the servers. If they consistenly work that job, it could be a viable source of qualification income... but it is REAL.
If the loan officer is having you quote fictitious monies, then it is Fraud.