Bank Statement Loans Pros and Cons

A bank statement loan is a useful tool for self-employed individuals who can’t accurately document their income using tax returns.  If your W2 doesn’t tell your financial story, the crew at Truss Financial Group has a way to use 12-24 months of bank statements to determine an average monthly income to see if you qualify for a mortgage.

Hey folks - thanks for reading today.  This is Phil from A Nightmare on Loan Street Blog, and I wanted to explain both sides of a popular topic: bank statement loans.  As you might imagine, these are based on bank statements that you’ll provide to the lender.  The reason these are so helpful is that many small business owners and entrepreneurs maximize their legal deductions and don’t qualify for a conventional loan at a big bank because of their W2.  This sure stacks the cards against them when they are looking for a mortgage.  Bank statement loans offer flexibility and an option for anyone in this position.  

It’s important to know the Pros and Cons of any big decision.  Just like my dinner at Applebee’s on Friday night.  Pros: endless wings are amazing on a Friday evening.  Cons: endless stomach aches are not on a Saturday morning.  Ultimately, I want to give you the information so that you can make the best decision for you…about bank statement loans.  I’d personally eat the wings.

Here’s a look at the Pros and Cons for bank statement loans.

Pros

• A viable alternative to a conventional mortgage if you don’t qualify based on your W2
• Can qualify with bank statements only
• Lower credit scores don’t disqualify you from a loan
• No PMI or mortgage insurance
• Debt to Income Ratio’s considered up to 50%
• Competitive rates

Cons

• Must be in business for at least 2 years
• Interest rates are likely 1-3% higher than conventional mortgages
• A 10-20% down payment will be required (note that this may be higher if credit score is very low)
• Not all lenders offer bank statement loans

A bank statement loan offers an option for self-employed individuals looking for mortgage.  So if you’ve been turned down by a big bank because of your W2, I’d recommend reaching out to the team at Truss Financial Group to learn more about their bank statement loans.