Bank Statement Loans for the Self-Employed

Bank statement loans are the financial tool you may not have known you needed.  If you’re self-employed and looking for a mortgage, it might be kind of tough.  Lots of self-employed small business owners maximize their legal deductions, which is kind of awesome.  Who wouldn’t want to minimize their tax burden?  One consequence of that is their income on their tax return might be pretty low.  

When it’s time for a loan, the big banks have an army of people named Carol or Rick that ask for your tax returns to see if you qualify.  Anytime you run into Carol or Rick, you might as well pack your bags.  A tax return does not accurately reflect the wealth of many self-employed applicants.  

When big banks give you the Heisman, it’s time to think of an alternative like a bank statement loan.  Bank statement loans offer more flexibility because they aren’t contingent on the income reported on your tax returns.  Truss Financial Group can help self-employed applicants because they don’t employ Carols or Ricks.  They do, however, specialize in bank statement loans.  Let me walk you through how it works…

You’ll need to provide 12-24 months of bank statements (duh).  Once those are reviewed, all the magic begins.  Your bank statements help determine an average monthly income based on deposits over time.  It also provides the basis for your debt to income ratio and how much you’ll be able to borrow.  

The other qualifications include:

• Your credit score 
• 580 or higher is the threshold
• A down payment of 10-20% 
• This can be tied to your credit score, so if your credit score is on the lower end, plan for a 20% down payment
• Reserves in your bank account to make your monthly mortgage payment
• Because businesses can have highs and lows or busy and slow seasons, having cash in reserve is required 

Bank statement loans do have some similarities with conventional loans as well.  You can get a bank statement loan for single family homes, townhomes, and condos.  You can also choose between fixed rate and adjustable rate loans.  Finally, since this is still a loan, interest rates will be part of the equation, so it’s important to ask about them as a borrower.

If you’ve been turned down for a conventional loan because you’re self-employed and your tax returns disqualified you, there’s definitely hope.  Call the team at Truss Financial Group to see how they can help you with a bank statement loan.  

Last week we had several potential clients ask our Loan Officers " What does an underwrite evaluate"? 

What does an Underwriter look for when evaluating a loan application?  Simply put they are verifying that the information listed on a loan application is supported by the documentation needed to satisfy the guidelines of a loan program.  The documents come from borrowers, escrow officers, title agents, county records, public records, and other third party services.  The job of an underwriter is not easy, they are considered the gatekeepers protecting the money so it is critical they evaluate loan applications thoroughly and accurately.