Financial institutions operate under very stringent rules and regulations that keep watch of all activities and ensure financial stability. Advancing of loans has conventionally been a product of the employed with the self-employed getting subjected to lengthy process before their money is disbursed. New loan guidelines have brought solace as bank statement mortgage loans are now being given to those in the private sector.
Management of financial resources is a sensitive part that requires the utmost care and professionalism when carrying out transactions. This explains why a loan must go through a thorough scrutiny of financial status vetting, income history and so on, just to assess their creditworthiness. The employed have to go through a process that is distinct from their self-employed counterparts, but generally, here are some thresholds that one must meet to qualify for a loan:
Factors that help you qualify for a loan
For a borrower to qualify for a loan they must have a good credit record. This a fundamental measure that helps assess the level of risk, and with a great credit score, the risk is obviously minimized. The lender needs to have confidence in the borrower that they will eventually pay back the loan.
For the bank statement mortgage loans, the financial institution can use personal assets as collateral. Besides, it provides an approximate value of one’s worth and a reflection of their credibility. Assets are also important in refinancing projects.
Lenders always desire to establish a relationship with borrowers who can be accountable and have a source of livelihood. This factor helps in calculating just how much to loan someone so that they are able to comfortably payback without defaulting.
This in part can be used as a security for a loan plan. These are financial reserves set aside for deferred consumption.
Supporting financial documents
They paint a picture of your financial status, income levels, cash flow, and current position.
New bank statement mortgage loans guidelines
Conventionally, before advancing mortgage loans to self-employed borrowers, they were required to produce two years of tax return documents. This, however, failed to reflect the actual financial status with the economy being on recess and favorable interchangeably. The guidelines, apparently have been reviewed and are friendlier.
Self-employed borrowers who:
- Don’t have the two-years tax return reports
- Any paychecks to show business transactions
- Employed but are partly self-employed
No longer have produced the 2-year tax return documents but the period has been shortened to 12 months. However, a cash flow analysis will be conducted to establish the liquidity and stability of the business the self-employed person is running. This will guide the lender to know if the borrower will comfortably make the monthly or periodic premium for the mortgage, or any other loan product in question.