Bank statement loans are a type of non-qualified mortgage loan that allows you to qualify based on bank statements instead of tax returns. The lender will require prospective borrowers to provide a certain number of months’ worth of bank statements in order to prove their ability to repay the loan. This enables self-employed borrowers to access home loans, even if their taxes don’t reflect their full income.
Bank statement mortgage programs are often a good option for self-employed individuals, business owners, and retirees who need an alternative income verification option. Find out whether a bank statement home loan from Griffin Funding is a good fit for you.
What is a Bank Statement Loan?
Bank statement loans have taken over the traditional stated income loans as an alternative for borrowers who are unable to verify their income in the traditional way by providing the previous two years tax returns, W2s and pay stubs. These are non-QM loans, nontraditional loans or expanded criteria loans that allow other forms of documentation to prove the ability to repay. Just as it sounds, a bank statement loan allows the borrower to verify his or her income with bank statements.
Advantages of a Bank Statement Loan
- You can do a cash-out refinance loan of up to 80 percent of the value of your property.
- You can borrow up to $5 million.
- Typically, bank statement lenders will accept a debt to income ratio of a maximum 50 percent.
- You have the option of a fixed-rate or adjustable mortgage.
- You may have the option for an interest-only mortgage.
- You can get a bank statement home loan for as little as 10 percent down.
- The lender does not need to look at your tax returns or tax transcripts.
- Your income statements are made up of regular monthly income deposits.
- The lender can look at 12 or 24-month bank statements.
- If you own a business, you can show 12-24 months of P&L statements. A P&L statement (profit and loss statement) is prepared by a Certified Public Accountant. Not all business owners will be required to present one.
The Key Eligibility Requirements for a Bank Statement Loan
Eligibility for a bank statement requires total deposits minus disallowed deposits. This amount is then divided by the number of bank statements, whether it is the 12 or 24 months statement.
Another option is that if the co-borrower is a W2 employee you can use a hybrid of W2 and tax return income from the co-borrower and bank statement income from the borrower or assets from the co-borrower and bank statements from the borrower. Non-QM loans can use multiples sources of blended incomes to qualify.
Deposits which are disallowed in regards to a bank statement loan include transfers between bank accounts and cash or large deposits, which can raise a level of concern and may require a letter of explanation.
Program rates and parameters are subject to change without notice. Turn times are estimates and are not warranted or guaranteed.