How many people in the United States are self employed? Make a guess? Finding it hard, right? Self-employment is a broad term. It can include people who run their own large firms to handymen with small shops. If you’re self-employed and can’t get a mortgage, try to apply for a bank statement loan. Since, you can’t guess how many people are self-employed, I’ll tell you. According to Statista, in spring 2017, there were 16.78 million people in the U.S who were self-employed. That’s a huge figure and many experts think even more people will turn to self-employment in the years to come. A major challenge that self-employed people face is getting approval for loans and mortgages because the traditional process of approval does not favor those who are self-employed.
Fortunately, there are some programs out there for helping self-employed people with the help of bank statement loans.
When approving a borrower for a loan, a mortgage lender verifies their income by checking recent pay stubs covering a period of 30 days in addition to W2 forms of the previous two years. Gross monthly income can easily be calculated because everything is laid out. But, that’s not the case with self-employed borrowers, and income documentation is always a problem.
For a regular worker who has a stable job and earns $200,000 a year, the bank can assume that each year he/she will make $200,000 or even more. With pay stubs, an employee can show proof of consistent income which gives more credence to mortgage lenders.
However, with self-employed borrowers, the case is completely different as they might make $250,000 in one year and in the next they might only make $150,000. Their fluctuating income makes a lender feel at risk.
What will happen if the income of the entrepreneur plummets?
You might be thinking you’ve made a mistake by joining the world of the self-employed. Not only is managing the business hard, but you’re also worried about borrowing money for purchasing a home.
Don’t fret, there’s one special program that can help; the bank statement loan program.
The bank statement loan program is a special type of mortgage program in which two years of income tax return, two years of W-2 and recent pay stubs are not required. Instead, the bank statements from the past 12-24 months can be used to establish proof of income.
If the income of the two years is different, then the income will be averaged for two years. This could either drag down your average monthly income or increase it.
While the bank statement loan program is mostly used for purchasing a primary home, but you can use it for other purposes as well. For example:
To qualify for the bank statement program there are a few requirements.
If you’re self-employed, you should be thankful to the bank statement program for increasing your chances of mortgage or loan approval. However, it’s critical that you are aware of all the requirements of the bank statement mortgage loan before you go to a mortgage lender. This will increase your chances of approval. Contact a knowledgeable professional for more information about bank statement mortgage program.
If you have been denied a home loan or have any questions about real estate or mortgage please contact the author, Matt Herbolich, MBA, JD, LLM by phone or text at 786.390.9499 or by email at firstname.lastname@example.org. Mr Herbolich works when you work, so feel free to contact him any time.