Bank Statement Loans
If you’re self-employed, a business owner, or someone who earns income through non-traditional means, qualifying for a conventional mortgage can be challenging. That’s where bank statement loans come in. These loans use your bank statements to verify income instead of relying on tax returns or pay stubs.
What is a Bank Statement Loan?
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A bank statement loan is a type of mortgage designed for individuals with irregular or non-traditional income, such as self-employed borrowers. Instead of using tax returns or W-2s to verify income, lenders review personal or business bank statements over a specified period (typically 12 to 24 months) to assess your cash flow and ability to repay the loan.
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This loan offers a solution for borrowers who may not qualify for conventional financing due to the nature of their income but have the means to make mortgage payments.
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Bank Statement Loan Requirements
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The requirements for a bank statement loan vary by lender, but generally include:
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Bank Statements: Lenders will ask for 12 to 24 months of personal or business bank statements to verify consistent income.
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Credit Score: A minimum credit score of 620 to 680 is typically required, though higher scores will help you secure better interest rates.
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Down Payment: Bank statement loans usually require a 15% to 25% down payment, depending on your credit score and the loan amount.
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Debt-to-Income (DTI) Ratio: Lenders prefer a DTI ratio of 43% or lower, but some may allow higher ratios if you have strong financials.
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All income deposits are totaled and averaged over the months of statements provided. The total monthly income is then reduced by expense ratio provided by CPA or corresponding to the industry the business is in.
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Bank Statement Loan Benefits
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No Tax Returns Required: You can qualify based on your bank statement income, making this loan ideal for self-employed individuals who don’t show high taxable income.
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Flexible Qualification: These loans are more flexible than conventional mortgages, making homeownership accessible for business owners or those with fluctuating income.
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The Bottom Line on Bank Statement Loans
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A bank statement loan is a great option for self-employed borrowers who want to leverage their bank deposits to qualify for a home loan. If you’ve struggled to get approved for a traditional mortgage, contact us today to see if this flexible option can work for you.
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