BANK STATEMENT PROGRAM

Unlike regular mortgages that rely on tax returns and pay stubs, bank statement loans use your bank statements to verify your income. This is a great option for self-employed individuals, freelancers, or those with commission-based income.

How do they work?

Instead of looking at your tax returns, lenders assess your bank statements to determine your income stability. This allows them to see a more accurate picture of your earnings, especially if you have tax write-offs that lower your taxable income.

Who can benefit?

• Self-employed individuals and business owners
• People with non-traditional income sources
• Seasonal workers with fluctuating income
• Individuals with lower credit scores (although qualifying might still be challenging)

Advantages of bank statement loans

• Flexible income verification: Qualify based on bank deposits, not tax returns.
• More property options: May be used to purchase second homes or investment properties.
• Potentially avoid PMI: You might not need private mortgage insurance with a sufficient down payment.
• Higher loan limits: In some cases, you may qualify for a larger loan amount.

Disadvantages to consider

• Higher down payment: Bank statement loans often require a larger down payment upfront compared to traditional mortgages.
• Potentially higher interest rates: Interest rates may be slightly higher than traditional loans.
• Limited availability: Not all lenders offer this type of loan, so you may need to search for a specialized lender.
• Business history requirement: Some lenders may require a minimum business history for approval.

Requirements for a bank statement loan

• Minimum credit score: This typically ranges from 640 to 680 or higher, depending on the lender.
• Proof of stable income: Consistent deposits into your bank account over 12-24 months are required.
• Bank statements: You'll need to provide 12-24 months of bank statements showing regular deposits that represent your income.
• Self-employment verification: Proof of business ownership, such as licenses or tax filings, may be required.
• Down payment: Expect a down payment of 10-20% of the purchase price, potentially more than traditional loans.
• Cash reserves: Having additional savings or liquid assets is helpful to cover unexpected expenses.
• Debt-to-income ratio: A ratio below 43% is ideal, but some lenders may be flexible depending on your overall financial picture.
• Proof of assets: Documentation of other assets you own, like retirement accounts or investments, may be required.

How to qualify for a bank statement loan

The process typically involves:

1. Consulting a loan officer: Discuss your options and get personalized advice from a qualified professional.
2. Gathering documents: Collect your bank statements, ID proof, proof of address, and any other documents requested by the lender.
3. Pre-approval application: Complete and submit the application, potentially using an online platform for uploading documents.
4. Loan amount determination: The loan officer will review your application and financial situation to determine the maximum loan amount you qualify for.
5. Pre-approval letter: If approved, you'll receive a pre-approval letter outlining the loan details.

By understanding how bank statement loans work and the requirements involved, you can determine if this option is the right fit for your needs.