Bank Statement Loans is a program meant mostly for the self-employed. They buy and can refinance their homes without worrying about tax returns and provision of the extensive documentation. The small business owners, freelancers, entrepreneurs, and self-employed persons are advised to get a bank statement mortgage loan at a low-rate without being stopped due to the taxable income.
Most self-employed persons have income that is not documented easily hence finds it hard to get a mortgage loan. Smaller net income made by these businesses allows them to qualify for optimum loans that can fit their needs. This programme has reduced the housing crisis by improving the conditions of approving bank statement mortgage loans.
Who Needs Bank Statement Loans?
Who benefits from bank statement mortgage loans?
The self-employed borrower is the most common beneficiary on this program and has an income that cannot be verified by paystubs. Despite the fact that they can provide the tax returns, the lenders use net income hence making them ineligible for the bank statement mortgage loans.
Bank statement mortgage loans enable these borrowers to provide the bank with 12 months statement showing income receipt including all the expenses incurred. This gives the bank a rough idea that the borrower can afford to pay the loan. In most cases, business owners write off on tax returns to minimize tax liability.
When applying for the Bank Statement Loans, the credit score should be an excellent, decent down payment and plenty of reserves. When refinancing with this program, lower the ratio of your loan-to-value ratio thus can raise the chances of Loan approval.
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Employees who are not permanently employed are qualified for bank statement loans. Seasonal employment may not give an employee enough money, hence in most cases, the lenders do not consider them qualified. This is because; the gross income per month is small due to a high debt ratio.
The bank statement mortgage loans document income with the employee’s bank statement. The employee’s income can only be used when he has worked there for at least two years. The lender will, therefore, annualize the income and use the statement in decision-making.
The employees who are paid based on the commission are also qualified for this program. Due to unpredictable income, the lenders use the tax returns when calculating income. Write-offs can, however, reduce the loan qualification, therefore, the lender will reduce the expenses the income to give chances of qualifying for the loan.
Living off of assets
Some people with no jobs may have other sources of income streaming in such as pension, investments and social security. Getting loan approval may be almost impossible; however, the bank statement loans can work for such people. The borrower must be able to prove that for the last 3 years, there has been a source on income. The lenders vary the terms depending on the reason on which the borrower needs the bank statement loan.