When applying for a home loan, you often need to provide your tax returns. But what if you don’t have those? Bank statement loans are a type of loan that allows you to get a mortgage without the documents that most loans need to prove your income. These are also known as “self-employed mortgages” or alternative documentation loans.
Bank Statement Loans Mortgage can usually be used if you work for yourself or own a business. They can also be used if you don’t have a steady income or have more than one employer who can prove your salary. Learn more about bank statement home loans and how they work.
What Is A Bank Statement?
Bank statements summarize your bank account activity. They may be mailed to you, emailed, or both. Banks issue statements to help keep track of your money and report it in a certain way. Checking and savings transactions are often shown on the same statement.
Your bank statement will be able to summarize your account balance, show you all purchase activity, and let you know if there have been any irregularities in recent months.
Bank statement loans are taking over traditional stated income loans as an appropriate option for borrowers with no way to verify income conventionally by providing previous two years of tax returns, W2s, and paystubs.
There are so many different types of loans that it can be confusing to know exactly what type you qualify for. These non-QM loans, nontraditional loans, or expanded criteria loans allow other documentation methods to prove the ability to repay. One type of loan is the bank statement loan which will enable you to verify your income by showing proof from your bank account.
Deposits
Banks deposit money in your account as interest is earned. You may also receive checks, wire transfers, and direct deposits into your account.
Withdrawals
Withdrawals indicate any money that has been transferred out of your account. For example, the bank will record the transaction on your account when you buy a product, use an ATM, or send money to someone else via transfer.
Is a bank statement mortgage right for you?
A bank statement loan might be advantageous if you are self-employed and have found that your tax returns don’t accurately reflect your current income.
However, even with inconsistent income, many people are eligible for more traditional types of mortgages.
Considering all the options with this type of loan need care & caution, as there are significant downsides.
Here you can help self-employed people with our Bank Statement Loan Program.
Self-employed people can buy and sell a home without submitting tax returns or financial statements aside from their bank statements.
This program lets you focus on other pressing matters without a ton of effort or worries. It is excellent for those who are always running around and constantly searching for the next lucrative opportunity.
Advantages of a Bank Statement Loan
These are the positive aspects of a bank statement loan:
1: The lender does not need to look at your tax returns or transcripts for any reason.
2: Your income deposits are made up of regular monthly income statements.
3: A lender can look at 12 or 24-month bank statements.
4: If you own a business, you can show 24 months of business statements for the same period and are prepared by an Accountant.
5: Not all businesses must provide this financial information, but some will require it to secure loans or other financing opportunities.
6: Bank interest rates these days are very affordable, with some going as low as 10 percent. You’ll have to save up for a few years, but you should be able to get a loan much sooner than without one.
7: With a cash-out refinance loan, you can get a portion of your property’s value and use it to eliminate all or part of your outstanding debt.
8: Borrowing is up to $5 million, which is easier than ever.
9: Let’s say your debt-to-income ratio is too high, meaning you’ve taken on too much debt. Some banks will take a risk that you won’t be able to make enough regular income to handle payments.
An alternative might be healthier, lower-interest credit cards, and of course, there are always other ways of managing debt, such as cutting back on unnecessary items.
10: There is the option of a fixed- or adjustable mortgage.
11: Interest-only mortgages are usually for those who want to pay less per month than the amount left over from their loan at maturity.
Special Considerations for Bank Statement Loans
1: This rule prevents mixing personal and business accounts into a single statement. If you have business expenses, you’ll need to find a way to keep track of the money.
2: Payments transferred from a business account to personal accounts are within the established guidelines.
3: This salary guidance document is designed to assist you in estimating your income from self-employment, working for your spouse, or receiving rental income. It does not address situations when more than one source of this income is used for estimation purposes.
4: No commingling of funds.
5: To understand foreign financial terms and see a translation, businesses must take off from the simplest terms and then use their resources to find accurate translations that are up to date.
Who should get a bank statement mortgage loan?
If you’re an independent contractor and don’t have a salaried income, securing the funding for your future with a house loan can be difficult.
A loan program that could help would be a bank statement loan. This type of loan is typically used by those with a low credit score or some other sort of challenge in credit terms.
1: Self-employed applicants.
2: Independent contractors.
3: Seasonal income.
4: Gig workers or freelancers.
5: Other earners with irregular income.
These loans can be outstanding for self-employed individuals looking to buy a new home or refinance an old mortgage. They are also straightforward to get approved for and often come with lower rates than mortgages from traditional lenders.
If you need to document your income but don’t have pay stubs and W2s, ask your mortgage broker or lender about underwriting based on personal bank statements. You may find that optimum mortgage eligibility is easier than you expected.
Types of bank statement loans
Depending on the lender and your specific situation, there are different ways to borrow money from a bank.
Keep in mind that lenders want to provide you with an affordable rate. The longer your bank statements are, the more likely they will qualify for a better deal.
Some lenders may request a business bank account balance to maintain more accurate records.
If your business runs out of bank statements, you often have personal bank statements. However, they will use a smaller percentage of your deposit to qualify for that loan.
In some cases, borrowers may need to find a tax professional who can give them an annual for their business.