If you are a self-employed business owner, you’re probably juggling business and home finances. Maybe you’ve decided it’s time to buy that house you and your family have wanted. 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 with good credit. A bank statement loan could be just the solution.
What is a Bank Statement Loan
With bank statement loans, the lender analyzes a borrower's income using bank statements instead of standard documentation.
Lenders that offer bank statement loan programs examine borrowers' bank statements over a 12- —to 24-month period to determine their net income, which is the amount of money earned after they have 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. However, in general, a borrower must 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, the percentage of monthly income that goes toward paying any debts 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 a 1 or higher down payment.
Like a traditional mortgage loan, a bank statement loan requires a good credit score for approval. You must also 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 you are to be approved for a bank statement loan.
If you want to see if a bank statement loan is right for you, contact the mortgage professionals at NASB at 888-661-1982 or click here for more information.
