Bank Statement Loans

What is a Bank Statement Loan?

A bank statement loan is a loan that enables borrowers to use their bank statements as proof of income rather than traditional documentation.

Bank statement loans are typically used by self-employed individuals or those who have irregular income streams that may not be reflected in traditional income documentation. Lenders will review the bank statements to assess the borrower’s income and expenses to determine their ability to repay the loan.

Because bank statement mortgages are considered higher risk for lenders, they often come with higher interest rates and fees than traditional loans. Additionally, the borrower may be required to provide a larger down payment or have a higher credit score to qualify for a bank statement loan.

How Does Bank Statement Mortgage Loan Work?

Bank statement loans allow borrowers to utilize their bank statements instead of traditional income verification methods, such as W-2s or tax returns. Here’s how the process typically works:

Providing Bank Statements: When applying for a bank statement home loan, the borrower must provide their bank statements for the previous 12-24 months. These statements will be used to determine the borrower’s average monthly deposits and expenses, which will be used to calculate their income.

Income Calculation: The lender will calculate the borrower’s income based on their average monthly deposits. This is typically done by adding up the total deposits for the specified time period and dividing by the number of months. This average monthly deposit amount will then be used to determine the borrower’s income for the loan application.

Expense Analysis: In addition to calculating the borrower’s income, the lender will also review their average monthly expenses to determine their ability to repay the loan. This includes expenses such as rent or mortgage payments, utilities, and other regular bills.

Qualification Requirements: To qualify for a bank statement mortgage loan, borrowers may be required to have a higher credit score or provide a larger down payment than for traditional loans. This is because bank statement mortgages are considered riskier for lenders since they rely on bank statements rather than traditional income

What are the Basic Bank Statement Mortgage Loan Requirements?

The specific requirements may vary depending on the lender and loan program, but here are some basic bank statement mortgage loan requirements:

Credit Score: Bank statement loans often require a minimum credit score, typically in the range of 600-700.

Down Payment: Borrowers may be required to provide a larger down payment than they would for a traditional loan, often between 10-20%.

Income Documentation: While bank statement loans don’t require traditional income documentation, borrowers will need to provide bank statements for the previous 12-24 months to verify their income.

Debt-to-Income Ratio: Bank Statement Mortgage Lenders may limit the debt-to-income ratio for bank statement loans, typically no higher than 43%.

Buy a Home with an Bank Statement Loan Now

Please contact us today to schedule your mortgage consultation. We work with homebuyers throughout Florida.