Bank Statement Mortgage
Our specialized bank statement mortgage loan program offers flexibility, options, and low rates, making it a great loan program for homebuyers and homeowners looking for an alternative mortgage.
What Is A Bank Statement Mortgage Loan?
A bank statement mortgage loan is a home loan program that allows self-employed applicants to document their income using bank statements, rather than traditional documentation. Most loan applicants opt for the 30-year fixed-rate option; however, other fixed-rate options and adjustable-rate options are also available.
Bank Statement Mortgage Loan Benefits
No Tax Returns Needed: The bank statement mortgage program does not require tax returns or any other official income documents. Just 12-24 months of bank statements.
Personal or Business Statements: A great feature about our bank statement mortgage program is that it allows for either 12-24 months of personal OR business bank statements. A nice benefit for our clients.
Derogatory Credit History Accepted: Derogatory credit history is accepted: bankruptcy, foreclosure, missed payments, and more. After your credit report is reviewed, the loan officer will discuss possible options.
Get The Right Bank Statement Mortgage Loan
When buying a home or refinancing a current mortgage, we’re the ideal partner for self-employed loan applicants seeking an alternative way to document their income. We’re here to ensure you get the right bank statement mortgage loan in the least amount of time. Experience, knowledge, and trust make us the ideal partner on your next mortgage transaction.
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Bank Statement Mortgage Loan Requirements
Here are the six core requirements for the bank statement mortgage loan program.
Credit
The minimum credit score requirement is a middle score of 620. Credit score requirements might be higher at higher loan amounts. If you are applying with another person, underwriting will use the lower middle score of the two applicants.
Income
Ideally, you’ll want a Debt-To-Income ratio at or below 38% to meet the programs income requirement. Underwriting can increase to a 50% Debt-To-Income(DTI) ratio in some circumstances. Income is based on bank deposits.
Equity
You’ll need at least 10% down for a purchase or, if it’s a refinance, at least 10% equity in the property. If you are doing a cash-out refinance, you must have at least 20% equity post-closing. Equity requirements are adjusted depending on credit score and DTI ratio.
Appraisal
You will be required to do an appraisal. If the property’s value or loan amount is high, you may have two appraisals (unlikely, though). The appraiser is independent of the transaction, which is a requirement most bank statement mortgage loan programs.
Asset
The asset requirement for the bank statement mortgage loan program is dependent upon your credit score and loan-to-value ratio. Anticipate needing to show one to three months of liquid assets under most circumstances. Some applicants will need to show more.
Documentation
The bank statement mortgage loan program requires 12 or 24 months of bank statements, all pages. Personal and/or business bank statements. The underwriter will review the deposits and calculate your average monthly income. From their they will have your DTI.
12 and 24-Month Bank Statement Mortgage Loan Guidelines
You may find lenders offering 12 and 24-month bank statement loan options. While they have the same premise – you qualify based on the average income reported on your bank statements, here’s the difference.
12-Month Bank Statement Mortgage
12-month bank statement loans take a 12-month average of your income. This is riskier for banks, so they often have higher interest rates or more rigid terms. Using 12 months of income doesn’t give banks a good idea of your business’s ability to succeed. It only provides one year of monthly changes, which isn’t enough time to decide if a business succeeds.
While 12-month bank statement loans are doable, they will usually cost you more in the long run.
24-Month Bank Statement Mortgage
24-month bank statement loans are less risky for lenders. They give lenders a 2-year history of your income and average your income over 24 months. This gives them a better chance to understand the viability of your business.
24-month bank statement loans have lower interest rates and better terms than 12-month loans.
The Difference Between Personal and Business Bank Statements
Here’s what you should know about providing personal and business bank statements;
If you provide personal bank statements, lenders can use 100% of the income reported (provided it’s clear the deposit came from the business). They’ll still take a 24-month (or 12-month) average, but they’ll use 100% of the income reported because it’s your personal income, not the business income.
However, if you only provide business bank statements, lenders can only use 50% of the income reported (that 50% number can be adjusted higher or lower). Let’s say you are providing 24 months of business bank statements. Lenders will divide the total deposited by two and then divide it by twenty-four to get the 24-month deposit average.
It’s always nice to have business bank statements because they show the actual receipt of income, but it doesn’t mean that 100% of the income belongs to you. That’s why lenders prefer personal and business bank statements, so your income is clear and understandable.
Bank Statement Mortgage Loan FAQs
How Hard Is It To Get A Bank Statement Mortgage?
Bank statement mortgages are primarily for the self-employed, freelancers, or independent contractors and take a little more effort to get qualified. You must meet the basic bank statement mortgage requirements, have decent credit, and have an acceptable debt-to-income ratio.
How Long Does It Take To Get Approved?
Unlike conventional or government-backed loans, bank statement loans are manually underwritten. This means they may take a little longer to underwrite because an underwriter must go through the loan, versus the automated system that traditional loans use. The typical time frame from when all your documentation is in to closing is thirty to forty days.
Do You Need The Bank To Verify Statements?
Sometimes, underwriters require you to prove that your bank issued the bank statements you turned in. If this happens, the underwriter will request that a bank complete a Verification of Deposit or stamp the bank statements to prove they are legitimate.
Is There a Pre-Payment Penalty?
Some bank statement mortgages have a one or two-year pre-payment penalty, while others might have a longer one. There are options with no pre-payment penalty, so be sure to ask your loan officer about this.
Does The FHA Have A Bank Statement Program?
No, FHA mortgages don’t have a bank statement option. Bank statement loans are only a niche product offered by banks that fund and keep the loans on their books. This means it might be a little harder to find a bank statement loan than it would be an FHA or conventional loan.
Explore Some Of Our Other Mortgage Programs
Conventional
A conventional mortgage is the most common mortgage program. Fannie Mae and Freddie Mac set the base guidelines.
FHA
FHA is a powerful program for those with less-than-perfect credit and a low down payment (or little equity).