When you apply for a home loan, you often need to provide your pay stubs, W-2s, and sometimes Tax Returns may be required.. But what if you don’t have those? An alternative documentation loan—or Bank Statement Loan—allows you to get a mortgage without those documents. These types of loans are also known as self-employed mortgages because they can be used if you work for yourself or own a business. They are also used if you don’t file enough income to qualify for traditional financing. Then we have just the thing for you. Here’s everything you need to know about Bank Statement Loans.
How Do Bank Statement Loans Work?
Bank Statement Loans are easier to get than other types of loans. Rather than needing copies of your tax returns, W-2 forms, pay stubs, and verification from your employer, you can use your last 12 to 24 months, personal or business to prove your income. You may need to give your lender other documents as part of the loan process..
Some of the things you may need for a Bank Statement loan are:
- A credit score that meets the lender’s requirements
- Enough cash or other liquid funds to cover several months of your mortgage payments
- Proof of any liquid assets, such as a 401(k) or investments
- 12 to 24 months of personal or business bank statements
- Two years’ history of self-employment
- Your business license if you have one
- A letter from your accountant proving your business expenses and stating that you file your tax returns as an independent contractor
The exact things you need to qualify for a mortgage will vary by lender. For example, some mortgage lenders accept lower credit scores from applicants than others. Some mortgage lenders may even allow gift funds. Because these loans are a little riskier for lenders, applicants may need to have a larger down payment than some would for a conventional loan. A higher interest rate may also be charged.
Who Is a Bank Statement Loan Good For?
If you don’t file a steady cash flow on your Tax Returns, you may want to use a bank statement loan. Or, if you don’t have proof of income from an employer, you may want to use a Bank Statement Loan. Consultants, freelancers, and small business owners are the ones who mostly make use of Bank Statement Loans.
For these professions, you might not be able to get a normal loan from a bank because the adjusted income on your Tax Returns doesn’t show the money you’re actually earning. However, with bank statement loans, you can offer bank statements showing your full income. This will allow you to get a loan otherwise unavailable to you. If you already own a home, you can also get a loan to refinance your mortgage using the same type of statements. This may be an option if you have left the traditional workforce since buying your home but would still like to take advantage of the benefits of refinancing.
Final Thoughts
We hope this article proves to be useful when it comes to helping you gain a better understanding of Bank Statement loans. As you can see, Bank Statement loans can be quite useful as long as the situation is right.
McGowan Mortgages offers loan mortgage services to help finance the property you wish to buy. Let us assist you in applying for a Bank Statement Loan and purchasing the property you’ve always wanted. Contact us today at (816) 631-9687.
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