Bank statement loans are a type of non-qualified mortgage loan that allows you to qualify based on bank statements instead of tax returns. This makes it easier for self-employed borrowers and those with low income to access home loans, especially if their tax returns don’t reflect their full income.
How Do Bank Statement Loans Work?
Unlike traditional loans, bank statement loans allow borrowers to verify their income with bank statements. This means you don’t need to submit any tax returns or financial statements other than your bank statements to purchase a new home or refinance an existing one.
Who Can Benefit from Bank Statement Loans?
This type of loan is perfect for self-employed individuals such as business owners, realtors, consultants, restaurant owners, gig economy workers, entrepreneurs, and more. It provides a solution for those who face challenges qualifying for a loan due to the net income claimed on their tax returns.
Applying for a Bank Statement Loan
To apply, the borrower can provide the lender with as little as 12 months of bank statements showing regular deposits. This allows the lender to see how much you can afford to borrow. The lender then verifies your bank statements by contacting your bank or by filling out a verification of deposit (VOD) request.
Eligibility Requirements
Eligibility for a bank statement loan requires total deposits minus disallowed deposits, divided by the number of bank statements. Disallowed deposits include transfers between bank accounts and large cash deposits, which may require a letter of explanation.
Is a Bank Statement Loan Right for You?
Bank statement loans are a convenient solution for modern-day borrowers, especially those whose financial profiles don’t fit neatly into traditional lending boxes. If you’re self-employed, a freelancer, an entrepreneur, or you have a fluctuating income that isn’t adequately captured by conventional income verification, a bank statement loan might be your key to homeownership. These loans are flexible, allowing your bank statements to provide a more complete picture of your income, thus making the dream of homeownership accessible to a broader range of borrowers.
