Bank Statement Loans
What are bank statement mortgages?
A bank statement loan, sometimes called a stated income loan, is a type of mortgage where you don't need to show all the usual financial documents like tax returns and W-2s. Instead, you use your bank statements to prove your income. This can be useful if your income isn't steady, or you have unique financial situations like claiming a lot of tax deductions
Non-Qualified Mortgages (Non-QM)
Bank statement loans fall under the category of non-qualified mortgages (Non-QM). These loans do not meet the standard guidelines set by Fannie Mae and Freddie Mac. While they offer more flexibility, they often have higher interest rates and might lack some of the protections of regular loans.
How Bank Statement Loans Work
When applying for a bank statement loan, you'll need to provide your bank statements from the past one or two years. If you have both personal and business accounts, you'll need statements for both. Your credit score will influence your down payment and interest rate, and these loans may come with prepayment penalties.
Requirements for Bank Statement Loans
To qualify for a bank statement loan, you generally need to meet the following criteria:
1. Bank Statements: Provide two years of bank statements.
2. Profit and Loss Statement: Required if you run a business.
3. Down Payment: Make a down payment of at least 10%.
4. Reserve Funds: Have enough funds to cover several months of mortgage payments.
5. Credit Score: Maintain a credit score of around 620 or higher.
6. Debt-to-Income Ratio: Keep your DTI below 55% (some lenders prefer 45% or lower).
7. Additional Documentation: Provide business licenses, organization documents, and other relevant paperwork.
Different Kinds of Bank statement Loans
Bank statement loans offer a range of options tailored to the diverse financial situations of borrowers who may not fit traditional lending criteria. Here are the different types of bank statement loans available:
Personal Bank Statement Loans
Personal bank statement loans are designed for individuals who use their personal bank statements to verify their income. Typically, lenders require 12 to 24 months of personal bank statements to assess the borrower’s income stability. This type of loan is particularly beneficial for freelancers, gig workers, and individuals with variable personal incomes.
Business Bank Statement Loans
Business bank statement loans use business bank statements for income verification. Like personal bank statement loans, lenders usually require 12 to 24 months of business bank statements and a profit and loss statement. Small business owners, entrepreneurs, and independent contractors often find this type of loan advantageous,
Mixed Bank Statement Loans
Mixed bank statement loans offer a combination of personal and business bank statements for income verification. Borrowers need to provide 12 to 24 months of both personal and business bank statements. This type of loan is ideal for self-employed individuals who draw income from both personal and business accounts, offering them greater flexibility in demonstrating their total income.
Asset Depletion Loans
Asset depletion loans allow borrowers to utilize liquid assets as a source of income to qualify for the loan. These loans require proof of sufficient liquid assets, such as savings or investments, to cover loan payments. They are particularly beneficial for retirees, investors, and high-net-worth individuals with substantial assets but limited traditional income sources.
Interest-Only Bank Statement Loans
Interest-only bank statement loans enable borrowers to pay only the interest for a specified period. This type of loan requires proof of income through bank statements and generally demands a higher credit score. It is suitable for borrowers looking to minimize initial monthly payments, offering them financial flexibility in the early stages of homeownership.
Who Benefits from Bank Statement Loans
People who can benefit from these loans include small business owners, freelancers, and gig workers. Also, real estate investors with income from their investments can qualify. If your income is paid in unique ways, like prepaid cards instead of direct deposits, these loans might help.
How to Find Bank Statement Loans
If your current lender doesn't offer bank statement loans, consider reaching out to a mortgage broker. Mortgage brokers have access to a variety of lenders who specialize in these types of loans and can help you find the best deals and terms available.
Bank statement loans offer a flexible alternative for those whose financial circumstances don't fit traditional lending criteria. They provide an opportunity for homeownership even with unique income situations, ensuring you have access to the financing you need.
Mortgage Branch Contact info:
Sincere Mortgage Group at NEXA Mortgage, LLC
Phone: 980-291-4848
Office Address: 153 S Oakland Ave. Rock Hill, South Carolina 29730
Corporate NMLS: 1660690
Branch NMLS: 2301082
Scottie Talaski NMLS: 1510907
Mike Easton NMLS: 1683075
Jessica (MJ) Easton NMLS: 2125367
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