Bank Statement Loans
A flexible mortgage solution designed specifically for self-employed individuals and business owners who may not have traditional tax returns to prove their income.
A flexible mortgage solution designed specifically for self-employed individuals and business owners who may not have traditional tax returns to prove their income.
How Do Bank Statement Loans Work?
Instead of using W-2s or tax returns, lenders review your personal or business bank statements (typically over 12 to 24 months) to calculate your average monthly income. This allows self-employed borrowers to qualify based on their actual cash flow rather than their taxable income.
Bank Statement Loans vs. Traditional (W-2) Loans
| Feature | Bank Statement Loan | Traditional (W-2) Loan |
|---|---|---|
| Income Verification | 12-24 months of bank statements | W-2s, Pay Stubs, Tax Returns |
| Ideal Borrower | Self-employed, Freelancers, Business Owners | Salaried or Hourly Employees |
| Interest Rates | Slightly higher (Non-QM) | Standard market rates |
| Down Payment | Typically 10% - 20% | As low as 3% (Conventional) or 3.5% (FHA) |
| Tax Deductions | High write-offs don't hurt qualification | High write-offs can reduce qualifying income |
Ideal For:
- Freelancers and independent contractors
- Small business owners
- Entrepreneurs with complex tax situations
- Gig economy workers
- Real estate investors with multiple income streams
Who is Eligible?
- Self-employed individuals, freelancers, and business owners.
- Borrowers who have been in business for at least two years.
- Those who have strong cash flow through their bank accounts but show lower net income on tax returns due to write-offs.
- Minimum credit scores typically start around 660.
What is the Process?
- Statement Collection: You provide 12 to 24 months of consecutive personal or business bank statements.
- Income Calculation: We analyze the deposits to determine your average monthly qualifying income (excluding transfers or non-business deposits).
- Pre-Approval: Based on the calculated income, credit score, and available down payment, we pre-approve you for a loan amount.
- Appraisal & Underwriting: The property is appraised, and the underwriter verifies your business existence (e.g., via a CPA letter or business license).
- Closing: Finalize the loan and purchase or refinance your home!
Is Mortgage Insurance Required?
Bank statement loans generally require a down payment of 10% to 20%. Depending on the lender and the specific Non-QM program, PMI may not be required even with less than 20% down, though the interest rate might be slightly adjusted to compensate.