A self-employed bank statement loan is a type of loan that is based on a borrower’s income from their self-employment. Unlike traditional loans, these loans do not require pay stubs or tax returns to prove income. Instead, lenders use the borrowers bank statement to verify their self-employment income and make a loan decision.
A bank statement loan allows self-employed pros, consultants, freelancers, and independent contractors a flexible way to income qualify by using deposits to their bank statements in lieu of tax returns.
What are the benefits of a bank statement mortgage?
A bank statement mortgage is a type of home loan that allows self-employed borrowers to use their bank statements instead of traditional income documents like tax returns, pay stubs, and W-2s to demonstrate their ability to repay the loan. Here are some potential benefits of a bank statement mortgage:
- Easier Approval
For self-employed individuals or those who earn income from multiple sources, it can be difficult to income qualify and provide the necessary income documentation required for a traditional mortgage.
The bank statement loan lender will use the primary income earner middle credit score which must be the self-employed borrower. The co-borrower can be self-employed or a W-2 employee. Think twice about applying with a co-borrower who has a lower credit score. At the very least, pull their credit score first, as a low score can hurt your chances at a good rate. (In this case, you’d only want to include your spouse if you absolutely need their income to qualify for the loan.)
- Larger Loan Amounts
Since bank statement mortgages are designed for self-employed individuals with higher income, borrowers may be able to qualify for a larger loan amount than they would with a traditional mortgage.
- Better Interest Rates
Bank statement mortgages may offer better interest rates compared to other alternative mortgage options like non-prime mortgages, making it a more affordable option for borrowers.
- Faster Processing
Bank statement mortgages generally have a quicker processing time than traditional mortgages, as there are fewer documents required and the approval process is often streamlined.
- Flexibility
Bank statement mortgages can be used for a variety of purposes, including primary residence, second homes, and investment properties, providing borrowers with greater flexibility in their real estate investment.
To qualify for a bank statement loan, you will typically need to meet the following criteria:
- Good credit: while bank statement loans are designed for self-employed borrowers who don’t qualify for traditional loans, lenders still want to see that you have a solid credit history. A credit score of at least 680 is typically required, although best rates are at 740 plus credit score.
- Strong income: Even though bank statement loans are designed for self-employed borrowers with non-traditional income sources, you need to have a steady income stream. Lenders will typically require that you have been self-employed or earning non-traditional income for at least two years and that you have a consistent pattern of deposits into your bank account.
- Sufficient reserves: lenders want to see that you have enough money in reserves to cover at least 6 months of mortgage payments in case of unforeseen circumstances.
- Adequate down payment: while the exact amount will depend on your credit score, the lender and your specific situation, most bank statement loans require a down payment of at least 10% to 20% of the home’s purchase price.
- Clean financial history: lenders will look at your financial history to make sure you haven’t had any recent bankruptcies, foreclosures, or other negative events that could impact your ability to repay.
Premier bank statement loan features and benefits
- 30-year fixed interest rates starting in the mid 6’s
- Purchase a home with as little as 10% downpayment
- Refinance cash-out up to 80% of property value
- Interest only option, 40-year fixed term, 10-year interest only period
- Qualify with business bank statements 12 or 24 months
- Loan amounts from $250,000 to $5 Million
- Occupancy - Primary, second home, and investment property
- Minimum credit score 700
It’s important to work with an experienced mortgage company that specializes in bank statement loans, that has a wide selection of lenders allowing for more options to qualify and can offer the best rates and costs.
Get a fast pre-approval in just 24-48 hours
Know your rate and closing costs from the very start
Getting pre-approved for a bank statement loan can help you gauge what interest rate you can expect – as well as determine an appropriate price range to shop in. Ready to get pre-approved for your bank statement loan? reach out to HomeLife mortgage today.
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About HomeLife Mortgage
For more than 25 years, HomeLife Mortgage has built a strong reputation in California and Florida as a leading mortgage broker, servicing the needs of borrowers who have been unable to obtain conventional financing. HomeLife Mortgage is at the forefront of non-bank lending offering the next generation of mortgages including Jumbo Loans, Real Estate Investor Loans, and Bank Statement Loans.
