A Bank Statement Loan, also referred to as a Bank Statement Mortgage, is a unique type of home loan designed for individuals with unconventional income streams. Unlike traditional mortgages, which rely heavily on tax returns and W-2 forms, bank statement loans use your bank statements to determine your eligibility.
Who Qualifies?
Bank statement loans are suitable for self-employed individuals, freelancers, gig workers, and small business owners who may not have a consistent, documented income. These loans are also an option for those with credit challenges.
Key Differences from Traditional Mortgages:
Income Documentation: Unlike traditional mortgages that require tax returns, bank statement loans use your bank statements to verify your income. This is particularly advantageous for self-employed borrowers who might write off expenses, making their taxable income lower.
Credit Requirements: Bank statement loans often have more flexible credit requirements, making homeownership more accessible to those with less-than-perfect credit scores.
Types of Bank Statement Loans:
12-Month Bank Statement Loan: This option uses the average of your monthly deposits over the past 12 months to calculate your income.
24-Month Bank Statement Loan: This loan takes an average of your monthly deposits over 24 months, providing more flexibility for those with seasonal income fluctuations.
Advantages of Bank Statement Loans:
Accessibility: They open doors for self-employed individuals and those with non-traditional income sources.
Flexible Income Calculation: Bank statement loans consider your actual cash flow, allowing for a more accurate representation of your financial capacity.
Credit Flexibility: They often have lenient credit requirements, accommodating borrowers with diverse credit profiles.
Property and Occupancy Types:
Bank statement loans can be used for a variety of property types, including single-family homes, condos, and 2-4 unit properties. They are available for primary residences, second homes, and investment properties.
Loan Options:
Purchase Loans: Ideal for buying a new home or property.
Rate and Term Refinances: Refinance your existing mortgage to secure better terms and rates.
Cash-Out Refinances: Access the equity in your property for various financial needs.
Flexible Down Payment:
Bank statement loans offer down payment options with as little as 10%, making homeownership more accessible.
Generous Loan Amounts:
These loans can be used for amounts of up to $4 million, providing flexibility for both modest and luxury properties.
Gift-Friendly Programs:
Bank statement loan programs are exceptionally “gift-friendly.” They allow gifts for down payments and reserves, even on investment properties. This feature can be a significant advantage, especially for those who receive financial support from family or friends.
In summary, Bank Statement Loans offer a versatile path to homeownership for individuals with non-traditional income sources. You can use personal or business bank statements for qualification, finance various property types, and choose from different loan options, including purchase, rate and term, and cash-out refinances. With flexible down payment options, generous loan amounts, and gift-friendly programs, Bank Statement Loans empower you to achieve your homeownership goals with ease and convenience.
Learn how we helped Donald, a pharmacy owner, the funds to expand his business despite having inconsistent income and little documentation. Our alternative qualification methods allowed Donald to qualify based on his bank statements, making the process quick and seamless.
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