These loans are killer. They allow a homeowner or an investor to buy a house based on stated income. Investors went nuts over these loans.



Typically, homeowners as well as investors have to prove their income in order to purchase a property. The more you make, the bigger the house you can afford or the more rentals you can buy. Liar loans allow you to buy a property based on what you state that you earn. As long as you had good credit, the banks were not asking for much else. I used to make jokes that as long as you could fog a mirror, you could get a loan. Unfortunately, you need to do more than fog a mirror to own a home, but the banks made it so easy.





You might make $50,000 a year and qualify for a $100,000 property. By stating that you earn $100,000 a year and with an interest-only loan, you can buy a $200,000 property. The problem is that you really qualify for a $100,000 property and based on the reality of things, that is what you can afford. Again, you have an emergency and next thing you know, youre using your mortgage payment money to pay for things. The term liar loans is a bit harsh, but it states exactly what it is people lied to get a bigger house or to buy more rentals.