Bank statement mortgage loans are different from traditional income loans. They are often used as an alternative by borrowers who are unable to verify their income tax returns. As they are non-traditional loans, they require other forms of documentation aside from the usual income tax returns or W2s.
Bank statement mortgage loans are the go-to for certain groups of people who may not have a regular income amount that can be filed for tax returns. This loan is popular among freelancers, independent contractors, realtors, contract workers, entrepreneurs, sole proprietors, and consultants. Because some may be ineligible for a loan, banks have offered this alternative where the borrower provides the bank statement that covers a certain period of time, like the last 12 months, to check the loanable amount.
Bank statement mortgage loans use the borrower’s bank statement to measure the ability of the borrower to pay back the loan. Compared to a traditional loan, this does not require a very high credit score to be able to take on a loan. The bank just checks on the regular monthly deposits if the borrower will be able to pay back the loan. Some lenders typically accept debt to income ratio of 50% maximum so borrowers can maximize their loan amounts.
For a self-employed or entrepreneur borrower, part of the requirement for eligibility is the business license and that the business is still active. Of course, there should be enough money in your bank statement to cover the payments for the first few months of the mortgage. Lenders would also require a verification of the borrower’s other liquid assets and investments.
Existing homeowners can opt for bank statement mortgage loans to refinance their own homes instead of the traditional home mortgage loans so they do not have to depend on the fixed income that they have. Getting a co-borrower with a higher credit score is an option to get lower interest rates for bank statement mortgage loans.
Because of the higher risk involved, bank statement mortgage loans often have a higher down payment than traditional loans and also have a higher interest rate. The higher down payment can also offset the higher interest rate and can also help shorten the loan repayment period, as long as the borrower can afford this.
Bank statement mortgage loans can have its advantages but it is best to consult with financial advisers especially if the borrower is also qualified for a traditional loan. This way, the financial adviser can help the borrower break down which options are better for availing a loan.
Consider setting up an appointment with Blake Mortgage if you are looking for a residential mortgage loan. Their financial planners are also Certified Mortgage Consultants and can give the best advice on how to avail of bank statement mortgage loans and how to qualify for one. As Blake Mortgage is partnered with a wide network of lenders, they can assist in planning out a customized mortgage plan and can help finance the most complicated transactions. Reach out to Blake Mortgage and find the best mortgage solutions for you.