Bank Statement Mortgage Loan

Bank Statement Mortgage Loan

Bank Statement Mortgage Loan for self-employed borrowers is becoming increasingly popular. Income tax returns are not required. There are no loan limits on bank statement mortgages for self-employed borrowers. Over the next few articles, we are going to look into the world of Non-QM Loan Programs.  Now if you are wondering what Non-QM Loan Programs are, these are programs that are non-traditional types of lending that can allow people to purchase homes who would not otherwise qualify.

What Are Non-QM Loans?

What Are Non-QM Loans?
Here at Loan Consultants, we make it a point to offer Non-QM Products so that every available borrower may have the option to purchase a home.  Included in this list of loan programs you can find are loans to individuals who are 1 day out of foreclosure or a short sale.  Most people might not even realize that Non-QM Products are available for them to use and most of these products were all created out of a necessity for lending options after the market collapse.

The End Of Subprime Loans After 2008 Financial Crisis

Back during the 2008 Real Estate and Mortgage Collapse that led to the Great Recession, stated income, no-doc mortgages, and teaser rate mortgages may have contributed to the collapse. Most people and industry professionals never dreamed non-QM loans would ever come back. It did. Bank statement mortgage loans for self-employed borrowers were the first non-QM loan program to make a comeback. These days the Bank Statement Mortgage Loan is used with a different purpose in mind.  In this article, we are going to tackle the fairly popular type of Non-QM Product and that is the Bank Statement Mortgage Loan.

What Is Bank Statement Mortgage Loan?

Now as you can probably tell from the name, we are primarily going to look at qualifying for a mortgage by, you guessed it, using only bank statements.  This is perfect for people that are self-employed, have seasonal income, or have otherwise detrimental tax returns.

How Does Bank Statement Mortgage Loan Work?

How Does Bank Statement Mortgage Loan Work?
The way the Bank Statement Mortgage Loan works is that borrowers will not be required to supply tax returns, W-2s, or even paystubs in order to calculate qualifying income.  What the borrower will need to provide is a combination of 12 to 24 months of bank statements and/or a Profit and Loss Statement prepared by the borrower’s accountant.  As you can see here, this greatly benefits the cyclical borrower who may not earn their income in a normal manner throughout the year.  We are able to offer such an attractive way to qualify for a mortgage when normally these borrowers may be denied at other lenders, but not here!

Types of Properties Eligible For Non-QM Loans

Just because you are interested in obtaining a Bank Statement Mortgage Loan, you will still need to purchase a qualifying type of property.  Under this program, there are many choices:

  • Single Family Home (Owner Occupied)
  • Investment Homes
  • Second Homes
  • Condos
  • Town Homes
  • 2-4 Unit Multi-Family Residential Properties
  • Condotels and Non-Warrantable Condos

If you are still not 100% certain how the Bank Statement Mortgage Loan works, then we will go over a few case scenarios to help illustrate what is needed of a borrower and how qualification happens under this type of program.

Documents Required On Bank Statement Mortgage Loan

Documents Required On Bank Statement Mortgage Loan

Income tax returns are not required on bank statement loans. Lenders will take 12 months of bank statements and average the deposits. Withdrawals do not matter. Only deposits will be averaged over the past 12 months and used as the qualifying monthly income.

Non-QM Bank Statement and P and L Statement Loan Program

Case Scenario with Bank Statements and P&L Statement

  • The borrower is to provide 12 months of bank statements
  • P&L from their company that lines up with the bank statement time period prepared by a CPA
  • Prepared P&L will be evaluated to determine reasonable expenses for the company and will also look to match expenses against the bank statements
  • Revenue that is reported on the P&L will also need to be matched to the bank statements in order to verify income for qualification purposes.

Case Scenario with No P&L

  • If there is no P&L Statement for the company then bank statements will be used to determine eligibility for the loan
  • Your 12 months of bank statements are averaged in order to determine the monthly income to be used for qualification
  • Deposits are averaged for the same time and doing so will smooth out your business if it is cyclical in nature

Bank Statement Mortgage Credit Requirements

Bank Statement Mortgage Credit Requirements
No overdrafts in the past 12 months. Three months or more in reserves are required. Normally a 20% down payment is required. The amount of reserves and the down payment requirement depend on the borrower’s credit scores and level of layered risk. Mortgage rates on non-QM loans depend on the size of the down payment, credit scores, type of property, and credit risk.  Three credit tradelines seasoned for at least 12 months are normally required.

Non-QM Lenders Who Are Experts On Bank Statement Mortgage Loans

As you can see the Bank Statement Mortgage Loan is a great opportunity for self-employed individuals to qualify and purchase a home when they do not have proper tax returns, W-2s, or normal pay stubs.  Given this, it is not out of the question for your credit strength to be verified and a lot of underwriters are not going to want to see overdraft charges on bank statements.  These may not be a deal killer, but avoiding them at all costs would be beneficial 100%.  So, if you are self-employed and looking to purchase a home or have been denied by other lenders, please contact us at Loan Consultants at 844-275-2007. Text us for a faster response.

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