Being self-employed does not mean you can’t get home financing. With a Bank Statement mortgage loan, you do not have to submit any tax returns or financial statements other than your bank statements to purchase a new home or cash out refinance an existing home that you already own.
WHAT IS A BANK STATEMENT LOAN?
Bank Statement mortgage loans are non-Qualified Mortgage (non-QM) loans, nontraditional loans or expanded criteria loans that allow other forms of documentation to prove ability to repay. A bank statement loan allows the borrower to verify his or her income with bank statements. This mortgage loan option has become a great alternative for borrowers who are unable to verify their income in the traditional way by providing the previous two years tax returns, W2s and pay stubs.
Bank statement loans are popular with the following types of borrowers: business owners, freelance employees, consultants, contract workers, independent contractors, sole proprietors, gig economy workers, realtors, entrepreneurs, and retirees.
The Bank Statement mortgage loan provides a solution for these types of borrowers, since they face the challenge of having to use their net income claimed on their tax returns rather than the true net income they make when trying to qualify for a traditional mortgage loan, causing many of these borrowers to be ineligible for a traditional mortgage loan.
HOW DOES A BANK STATEMENT LOAN WORK?
HOW IT WORKS
- To apply for a bank statement loan, the self-employed borrower can provide the mortgage lender with as little as 12 months of bank statements which show regular deposits
- This allows the lender to see how much you can afford to borrow
- The lender would then verify your bank statements by calling your bank or by filling out a verification of deposit (VOD) request and mailing or faxing it to your bank
- If you are using business bank statements to qualify, the lender will still need to see the expenses from the business but will not penalize you for expenses that you have written off on your tax returns.
BANK STATEMENT LOAN REQUIREMENTS
- Must have at least 10% for down payment (dependent on credit score)
- Provide 12-24 months of bank statements
- Minimum loan amount of $100,000
- Minimum 600 credit score
Key Points
- Great option for self-employed borrowers
- Use Personal Bank Statements to qualify
- Use Business Bank Statements to qualify
- Don’t have to submit Tax Returns
