What Is a Bank Statement Loan?

A bank statement loan is a type of mortgage that applicants can obtain based on their bank account statements rather than having to provide 澳洲幸运5官方开奖结果体彩网:W-2 forms, 🍨pay stubs, and tax returns, as is usually the case. Bank statement💯 loans can be useful for self-employed individuals and other borrowers with inconsistent incomes.

How a Bank Statement Loan Works

When you apply for a bank statement loan, the lender will want to examine a year or more of your business or personal bank statements to v🌳erify that you have sufficient income to make the ne𒐪cessary payments on a mortgage.

This type of loan can be a good option for borrowers whose income is inconsistent or whose tax returns do not offer the full picture. That can be true for individuals such as small business owners whose incomes may fluctuate and who may claim write-offs that affect how their income is𝄹 reflected on the🌳ir tax returns.

Bank statement loans are considered 澳洲幸运5官方开奖结果体彩网:non-qualified mortgages (non-QMs). Unlike qualified mortgages, non-QM loans do not adhere to the Consumer Financial Protection Bureau (CFPB) ability-to-repay rule. This rule is designed to ensure that lenders carefully examine your finance๊s. Non-QM loans are also not backed by government entities, such as Fannie Mae or Freddie Mac.

Non-QM loans can make it easier for people who don't meet traditional 澳洲幸运5官方开奖结果体彩网:underwriting standards to obtain a mortgage and༺ buy a home. However, they can also be❀ riskier for both buyers and lenders.

Pros and Cons of Bank Statement Loans

Before moving forwar🔥d with a bank statement loan, its worth considering both their pros and cons.

Pros

• Easier documentation requirements. Instead of having to demonstrate your income via W-2s and tax returns, you can simply use your bank statements to show your desirability as a loan candidate.
• Flexibility. You may find that lenders offer more flexibility in the eligibility requirements for a bank statement loan compared to a regular mortgage.

Cons

• Higher down payment. With a normal mortgage, you may be able to put down as little as 3% of the home's purchase price as a down payment. With a bank statement loan, the down payment requirement is typically higher, up to 20%.
• Higher interest rate. Lenders may also charge higher interest rates for bank statement loans compared to other mortgages.
• Fewer lenders. As with non-QM loans generally, lenders consider bank statement loans riskier and not as many lenders offer them.
  

How to Qualify and Apply for a Ban♒k Statement Loan

In deciding whether you qualify for a bank statement loan, the lender will conside🐽r your:

• Credit score. Most lenders will have a minimum credit score requirement for bank statement loan applicants.
• Assets. You will need to be able to show that you have sufficient 澳洲幸运5官方开奖结果体彩网:liquid assets, such as in a bank or brokerage account, to meet the lender's requirements.
• Income and employment. While you may not have W-2s from an employer, you will need to show that you have an adequate income (as evidenced by your bank statements) and a history of self-employment or other employment.

Once y😼ou are prepared to move forward with a bank st▨atement loan:

• Compare lenders. As with any kind of mortgage, it's important to shop around before making a decision. 澳洲幸运5官方开奖结果体彩网:Comparing lenders can help you find the best interest rate.
• Gather the necessary documents. You will most likely need at least 12 to 24 months of bank statements. You may also need to provide proof of a business license and paperwork supporting your business expenses.
• Apply. Once you have selected a lender and collected the essential paperwork, you're ready to submit your application.

Alternatives to Bank Statement Loans

While a bank statement loan could be the right choice, there are other 💫optionsജ to consider.

• Conventional mortgages. The most common type of mortgage loan, conventional mortgages, comes in two basic types. Conforming loans meet the requirements of 澳洲幸运5官方开奖结果体彩网:Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy up mortgages from lenders and package them for resale as securities. Non-conforming loans don't meet those requirements, such as by exceeding the conforming loan maximums. These loans, all of which are issued by private lenders like banks and credit unions, can carry fixed or adjustable interest rates and may be written for a variety of different terms, such as 15 or 30 years. Anyone may be eligible for one if they satisfy the income requirements and other criteria.
• FHA loans. The Federal Housing Administration (FHA) backs 澳洲幸运5官方开奖结果体彩网:FHA loans, which can be an option for people with lower incomes or credit scores. FHA loans require smaller down payments, as low as 3.5% in some cases, and have low closing costs.
• VA loans. If you are an active service member, veteran, or the surviving spouse of one, you may be able to secure a loan through the U.S. Department of Veterans Affairs. VA loans can be available with no down payment.

The Bottom Line

If you are self-employed or have an adequate but irregular income, a bank statement loan may make it easier for you qualify for a mortgage and buy a home. But it is not your only option and there are others worth considering that may be less expensive. If you do decide to go the bank statement loan route, plan to shop around and compare multiple lenders to make sure you're getting the best deal possible.