Are you interested in getting a mortgage but don’t want to have to go through all of the long, detailed paperwork of the process? A Bank Statement Mortgage might be the perfect option! This article will provide you with everything you need to know in order to apply for a Bank Statement Mortgage.
1. What is a Bank Statement Mortgage?
A bank statement mortgage is a type of loan for self-employed borrowers that doesn’t rely on the traditional W-2 wage earner scheme to qualify for an approval. Rather, lenders allow the borrowers to use their business or self-employment income as proof of income.
This type of loan requires the borrower to provide supporting documents such as bank statements to prove their income. These documents verify that the self-employed applicant is actually receiving the income they declare on their application. Some mortgage lenders may also require professional tax returns and/or an accountant’s letter.
- Pros:
- Perfect loan option for self-employed individuals who may not always have W-2 wage earning income.
- You don’t need to provide tax returns to verify your income.
- Allows you to use the actual numbers of your self-employment income.
- Cons:
- Trouble getting qualified if your income has been unstable.
- Expensive and limited to certain mortgage lenders.
- High interest rates.
2. Are You Eligible for a Bank Statement Mortgage?
To be eligible for a bank statement mortgage, you need to meet certain criteria that lenders use to determine your creditworthiness. It is important to keep in mind that lenders have different requirements, so even if you meet these criteria, you may not be approved for the loan.
What kinds of criteria do mortgage lenders require?
- Proof of employment – Your income and length of employment will factor into the loan approval process. The more stable your employment, the better.
- Proof of income – Lenders review bank statements to evaluate how often you get paid and to make sure you can afford your mortgage payments.
- Good credit score – A higher credit score will increase your chances of getting a loan.
All in all, applying for a bank statement mortgage is not always a straightforward process. Researching lenders, understanding their requirements and having the right paperwork will make the process easier and potentially help you get approved.
3. Benefits of a Bank Statement Mortgage
A bank statement mortgage is a loan for self-employed individuals rather than a traditional loan. While it has several benefits, the biggest advantage of a bank statement mortgage is the ability to qualify without income tax returns. Here are more benefits:
- Low Credit Scores are not a Problem – A bank statement mortgage requires lower credit scores than a traditional loan, so if you have a lower credit score, you can still qualify for these loan types.
- Non-Traditional or Low Income are Acceptable – For those with income that is non-traditional, hard to verify, or seasonal, this loan type allows for different kinds of income that can still qualify. A Bank Statement Mortgage provides far more qualifying flexibility than other loan products.
- Speed and Efficiency – Approval and funding are much quicker with this type of loan since income tax returns are not needed. Loan quotes can be provided very quickly.
This type of loan product is also simpler and easy to understand, with all of the requirements upfront and clearly outlined, so you can be sure of all costs in order to factor them into your plans. With flexible income requirements, this type of loan product is worth looking into for those with non-traditional income or low credit scores.
4. How to Apply for a Bank Statement Mortgage
Understand the Basics
Before you begin the application process for a bank statement mortgage, you should understand some of the basics of the loan. This type of home loan is typically meant for self-employed borrowers and requires that most, if not all, loan payments come from deposits made into your bank accounts. This can include income from business dealings, investments, and other sources.
Know Your Mortgage Options
When it comes to bank statement mortgages, there are various options available to you. Generally, such a loan will be for a conventional 30-year fixed-rate mortgage, an adjustable-rate mortgage, or a jumbo loan. Depending on your income and the loan you choose, you may need to provide additional supporting documents, such as tax returns and proof of current income.
Once you understand the different options available, it's time to apply. Here are some tips to help you get started:
- Gather financial documents, such as your bank statements, most recent pay stubs, and W-2 forms.
- Submit an application to your lender. Some lenders may also require additional documents.
- Hire an appraiser to assess the value of the property you're considering.
- Leave enough time for the lender to process your loan application and close the loan properly.
Once you have the necessary paperwork in order, you can begin the process of applying for a bank statement mortgage. Understanding how bank statement mortgages work can put you steps ahead in the home-buying process. Being aware of the terms and conditions associated with them can help you to choose the right kind of mortgage for your needs. Remember, mortgages don’t have to be complicated – just make sure you do your research and take the time to explore your options. Here’s wishing you luck in your endeavor to find the perfect mortgage for the perfect home.
