For many, the dream of owning a home or investment property feels out of reach due to strict lending requirements. Bank statement loans offer a unique solution by allowing borrowers to use their bank deposits as proof of income, making homeownership more accessible. This alternative path can help self-employed individuals or those with non-traditional income sources secure a mortgage without traditional pay stubs or tax returns.
Key Takeaways
- Bank statement loans simplify income verification for many borrowers.
- Knowledge of the application process can streamline the journey to homeownership.
- Choosing the right lender improves the chances of securing a bank statement loan.
Understanding Bank Statement Loans
Bank statement loans are a type of mortgage designed for self-employed individuals or those with irregular income. Instead of requiring a standard W-2s or tax returns, lenders review bank statements to assess the borrower’s ability to repay. Typically, applicants provide 12 to 24 months of bank statements. This shows consistent deposits, helping lenders determine income stability.
These loans are beneficial for freelancers, business owners, or anyone else whose income might not fit traditional molds. This path allows many to secure financing who might not otherwise qualify for a mortgage.
The Eligibility Criteria
To qualify for a bank statement loan, applicants must meet specific criteria. Typically, lenders look for borrowers with a strong credit score and the ability to make a sufficient down payment.
Applicants must show proof of self-employment or unsteady income through bank statements. Lenders might need to see consistent deposits that match or exceed the expected income level.
Having a healthy savings balance can strengthen an application. Reputable lenders want to ensure borrowers can handle ongoing costs.
Advantages Over Traditional Mortgages
Bank statement loans come with distinct advantages. They provide flexibility in income verification, making them ideal for those with variable earnings. Applicants might not need to provide tax returns, simplifying the process.
They allow for faster approvals since the paperwork is less extensive. Some lenders focus more on cash flow instead of traditional income measures.
Another advantage is that borrowers can prove their financial stability through personal banking habits. This gives a clearer picture of a borrower’s ability to handle the mortgage, ensuring a better fit for many who struggle with conventional loans.
Applying for a Bank Statement Loan
Here’s a closer look at the steps involved, the necessary documents, and how financial profiles are assessed.
Application Process Step-by-Step
- Choose a Lender: The first step is to find a lender, like LendSure Home Loans, that offers bank statement loans. Research options to find the best rates and terms.
- Initial Application: Fill out a loan application detailing personal and financial information. This form is essential for the lender in assessing eligibility.
- Submit Bank Statements: Provide the required bank statements, showcasing consistent income.
- Fill out a self-employment questionnaire. This will help determine the expense factor of the business. An expense factor is the percentage of the income that is used to operate the business. For example, an accountant will likely have a much lower expense factor than a hair dresser or a restaurant owner. Unlike many lenders, LendSure Home Loans does not assign a blanket expense factor to the deposits.
- Review and Approval: The lender will review the application and documents. They will assess creditworthiness and determine the loan amount.
- Closing: After approval, the final step is to close the loan. This involves signing documents and finalizing the mortgage terms.
Required Documentation
Here’s a list of what is typically required to apply for a bank statement loan.
- Personal Identification: A valid government-issued ID or driver’s license.
- Bank Statements: 12-24 months of bank statements showing deposits and consistent income.
- Asset Documentation: Proof of assets, such as savings accounts or retirement accounts.
- Credit Report: A recent report to evaluate credit history.
These gathered documents provide lenders with a snapshot of financial health, and having them ready can speed up the whole application process.
Assessing Your Financial Profile
Lenders consider several factors when assessing financial profiles for bank statement loans.
- Income Stability: Lenders look for regular deposits and consistent income. A stable financial history strengthens the application.
- Credit Score: While bank statement loans focus less on credit scores than traditional loans, a good score is still beneficial. It can lead to better rates.
- Debt-to-Income Ratio: This ratio compares monthly debts to monthly income. A lower ratio equals better financial health.
- Assessing these factors helps lenders make informed decisions about loan approval. Understanding these elements can assist borrowers in preparing their applications effectively.
About LendSure Home Loans’ Bank Statement Program
At LendSure Home Loans, you can qualify for a bank statement loan by providing 12 or 24 months of personal or business bank statements.
Check out our program highlights:
- Loan amounts up to $3,000,000
- Loan-to-Value up to 90%
- Borrower does not have to be 100% owner of the business
- W-2 with Bank Statements combinations allowed
- Profit & Loss statements NOT required
- Business expense ratio as low as 10%
- Multiple business bank accounts acceptable
Why LendSure Home Loans?
It’s simple. We make loans that make sense. We’re not in-the-box lenders. Of course, there are numbers, ratios, and data to consider, but we know that behind every file, there’s an individual with unique circumstances seeking a loan.
We’re redefining the mortgage experience one loan at a time. Thanks to our common-sense approach and dedicated lending team, we say ‘yes’ more often to today’s homeowners and investors.
Ready to reach out to learn more about Bank Statement loans for investors like you? Contact us today!
