By Matt Allen
Vice President, Portfolio Lending (NMLS #415037);

How Bank Statement Loans Work

Sep 30, 2019

  • Mortgages
  • Mortgage Programs
  • Bank Statement Loan

If you are a self-employed business owner, you’re probably juggling the different aspects of business and home finances. Maybe you’ve decided it’s time to buy that house you and your family have been wanting. When you're self-employed, you don't have the luxury of being able to provide pay stubs or show net income on tax returns when you're trying to secure a mortgage loan. Not having these required documents can make getting approved difficult, even if you have good credit.  A bank statement loan could be just the solution.

What is a Bank Statement Loan

With bank statement loans, the lender uses bank statements to analyze a borrower's income instead of using standard documentation. 

Lenders that offer bank statement loan programs will look at a borrower's bank statements over a 12 to 24 month time period to determine the borrower's net income, which is the amount of money earned after the borrower has paid taxes and business-related expenses.

How to Qualify for a Bank Statement Loan

The qualifications for a bank statement loan may vary by lender. But in general, a borrower is required to have at least two years of self-employed income and business experience. Once a lender has determined income, they will decide the maximum loan amount allowed. This is based on the borrower’s debt-to-income ratio, which is a percentage of the monthly income that goes towards paying any debt they may have, including a mortgage.

Lenders usually require a higher down payment for a bank statement loan. Even if the borrower has a good credit history, the lender may require 10% or more for a down payment on the loan.

Like a traditional mortgage loan, you must maintain a good credit score to be approved for a bank statement loan, and keep reserve money on hand to show that you have available funds if your income falls too low. The lower your loan-to-value ratio, the more likely it will be that you'll be approved for a bank statement loan.

If you would like to see if a bank statement loan is right for you, contact the mortgage professionals at NASB at 855-465-0753, or click here for more information.