Bank statement loans are an excellent option for self-employed borrowers who need an alternative to traditional income verification methods. Instead of relying on tax returns, these loans use bank statements to demonstrate your ability to repay the loan.
Bank statement loans are non-qualified mortgage loans that allow you to qualify based on your bank statements rather than tax returns. Borrowers need to provide a specific number of months’ worth of bank statements to prove their income and ability to repay the loan. This option is particularly useful for self-employed individuals, business owners, and retirees who may not have traditional income documentation.
The application process for a bank statement loan differs from that of a conventional mortgage. You’ll need to submit bank statements from the past 12 to 24 months, along with information about your business and its expenses. If you have both personal and business accounts, you'll need to provide statements for both. Lenders may also inquire about your business type, number of employees, and location to assess your expenses.
Depending on your credit score, you may be required to make a larger down payment. Typically, a credit score of 620 or higher is needed, though a score of 700 or more can secure better rates and terms.
Types of Bank Statement Loans
There are various bank statement loan programs available, which can vary by lender and borrower circumstances. Most lenders require a minimum of 12 months of bank statements, but some might accept fewer months. Providing 24 months of statements may help you qualify for better rates and terms.
Some lenders may require business bank statements instead of personal ones. If you lack business bank statements, you might still qualify but with a smaller percentage of your deposits considered for qualification. In certain cases, you may also need to provide a profit and loss (P&L) statement prepared by a tax professional.
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