Bank Statement Cash Out Refinance: Learn How for Self-Employed Workers Can Take Advantage

In short, bank statement loans can be a great option for small business owners and the self-employed when it comes time to get a mortgage. Often, these borrowers don’t have the traditional income documents like W2s and pay stubs that big banks require. Instead, bank statement loans use 12-24 months of bank statements to determine an applicant’s average monthly income and assess their debt-to-income ratio.

Beyond home purchases, bank statement loans can also be used for a bank statement cash-out refinance, allowing homeowners to access their home equity without needing traditional income verification. This can be especially useful for self-employed individuals looking to reinvest in their business, consolidate debt, or cover major expenses while leveraging the value of their home.

Now that you know the basics of the bank statement loan, how does it work if a small business owner or self-employed worker wants to refinance?  Well, I’m glad that I asked myself.  Let’s discuss.  

Refinancing with a bank statement loan uses the same principles.  As a borrower looking to refinance with a bank statement loan, you can expect to provide:

• 12-24 months of bank statements
• Tax returns - potentially for a few years
• Credit score
• Profit and Loss (P&L) statement
• Balance sheet

Some helpful tips to strengthen the loan application when refinancing include:

1. Lower your debt if possible.  This can be achieved by paying down high-interest loans or credit card bills, or just working to eliminate debt over time.  This is not a quick fix in most cases, so it’s helpful to have this as a long-term goal.  Lowering your debt will also help raise your credit score.  Kind of a double whammy.
2. Start buttering up your accountant.  Drop him/her compliments.  Let them know how awesome they are on the regular.  Maybe send flowers or chocolates to their office.  Why?  You will want a solid relationship so that your accountant can help with things like your P&L, balance sheet, and any other document requests that might come in regarding finances.  Refinancing is a multi-step process that can take a month or longer, so the quicker you can get the lender the documents they request, the quicker each step can be completed.
3. Maintain cash reserves - if possible.  Lenders favor borrowers who have a cash reserve.  It demonstrates financial responsibility, and the ability to manage money.  These are helpful traits banks find impressive.  Remember, anything you can do to show that you’re likely to repay the loan is a good thing.

If you’re self-employed, run your own business, or are an entrepreneur and thinking about refinancing, I’ve got just the resource for you: Truss Financial Group.  The team at Truss takes a common sense approach to lending, and they also happen to specialize in bank statement loans and refinancing.  Give them a call today.  You’ll be glad you did.