Get Approved for a Mortgage with Bank Statement Loans Today
Bank Statement Loans for 2024: The Easiest Way for Self-Employed Borrowers to Get Approved
If you’re self-employed, you’re likely familiar with the challenges of securing a traditional mortgage. With inconsistent income, deductions on tax returns, and no steady paycheck, the odds are stacked against you. But here’s the good news: bank statement loans are specifically designed for people like you! Whether you want to purchase a home or refinance, bank statement loans fit your needs.
In 2024, bank statement loans remain one of the most popular mortgage programs for self-employed borrowers. Whether you’re a freelancer, gig worker, small business owner, or independent contractor, this loan could help you buy your dream home without the headache of traditional income verification.
Let’s dive deeper into bank statement loans, how they work, and why they might be exactly what you need to buy or refinance a home.
What Are Bank Statement Loans?
Bank statement loans are non-traditional mortgage loans that allow self-employed borrowers to use their bank statements to qualify for a mortgage instead of using tax returns, W-2s, or pay stubs. As a self-employed individual, you are likely accustomed to experiencing varying income levels from month to month, making it challenging to meet the requirements for a conventional loan.
With bank statement loans, the lender looks at the cash flow in your bank account over the last 12 to 24 months to determine your ability to make mortgage payments. Many second home buyers will buy waterfront condominiums with bank statement loans as a second home.
There is no need to worry about proving your income through complex tax documents. As long as you have consistent deposits in your bank account, you’re already one step closer to homeownership! Speak With Our Loan Officer for Bank Statement Loans
Why Bank Statement Loans Are Perfect for Self-Employed Borrowers
If you’ve tried applying for a traditional mortgage before, you know how challenging it can be as a self-employed borrower. Lenders often ask for two years’ worth of tax returns, and any deductions you’ve claimed on your taxes can reduce your qualifying income. This is where bank statement loans shine. These loans focus on your bank deposits rather than your tax returns, meaning you don’t need to worry about how many business deductions you’ve taken.
Here’s how it works:
- Instead of showing your tax returns or pay stubs, you provide bank statements for the last 12 to 24 months.
- Lenders use these statements to calculate your average monthly income based on deposits.
- You must show that you’ve been in business for at least two years to qualify.
If you’re a self-employed borrower, bank statement loans provide the flexibility you need whether you’re in the market for a primary residence, a second home, or an investment property.
How Do Bank Statement Loans Work?
The process of getting a bank statement loan is straightforward. Here’s what happens:
- Gather Your Bank Statements: The lender will request 12 to 24 months of personal or business bank statements to assess your income.
- Analyze Deposits: The lender will add up the deposits in your statements to determine your monthly income. Some lenders will consider 100% of your deposits. In contrast, others may only use a percentage, such as 50%, to account for business expenses.
- Calculate Debt-to-Income (DTI) Ratio: Lenders will also calculate your debt-to-income ratio (DTI), which helps them determine how much you can afford to borrow.
- Determine Loan Amount: Based on your income and DTI, the lender will determine the maximum loan amount you qualify for.
- Submit Other Documents: While bank statements are the primary method of income verification, lenders may still require documentation to prove you’ve been in business for at least two years.
2024 Updates on Bank Statement Loans
In 2024, bank statement loans are still an excellent option for self-employed borrowers. Still, there have been some important updates that can benefit you:
- Faster processing times: Lenders have streamlined the approval process, meaning you can get approved and close your loan even faster.
- Higher loan limits: Some lenders now offer larger loan amounts for borrowers with higher incomes and significant assets.
- Lower down payments: While the standard down payment is still 20%, some lenders may offer down payments as low as 10% for borrowers with high credit scores.
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How Can You Qualify for a Bank Statement Loan in 2024?
The qualification process for bank statement loans is more flexible than traditional loans. However, there are still some basic requirements you need to meet:
- Bank Statements: You’ll need 12 to 24 months of personal or business bank statements showing consistent deposits.
- Credit Score: Lenders require a minimum of 660 credit score, but a higher score might result in more favorable terms and a reduced down payment.
- Down Payment: You should expect to put down 20% of the home’s purchase price. However, some lenders may accept 10% down if you have a strong financial profile.
- Debt-to-Income (DTI) Ratio: Many lenders will allow a DTI as high as 50%, which gives you more flexibility if you have other debts.
What If You’ve Had a Bankruptcy or Foreclosure?
One of the great things about bank statement loans is their flexibility. You can still qualify for a bank statement loan even if you’ve had a bankruptcy or foreclosure. There are no strict waiting periods after these financial events. Lenders will likely work with you as long as your recent bank statements show that you’ve recovered and can handle the payments.
Why Bank Statement Loans Are a Game-Changer for Homebuyers
If you’re self-employed, you know that writing off expenses on your taxes can reduce your taxable income. While this is great for reducing your tax bill, it can make qualifying for a traditional mortgage tough. That’s where bank statement loans come in and save the day.
With bank statement loans, it doesn’t matter if you’ve claimed many tax deductions. All that matters is the cash flow shown in your bank statements. This makes the loan perfect for anyone who owns a business, works freelance, or has a side hustle and doesn’t get paid on a regular W-2.
What Properties Can You Buy with a Bank Statement Loan?
One of the best parts about bank statement loans is their versatility. You can use them to buy a variety of properties, including:
- Primary residences: Your forever home, where you plan to live full-time.
- Second homes: A vacation property, like a beach house or cabin in the mountains.
- Investment properties: A rental property that helps you generate income.
No matter what type of property you’re interested in, bank statement loans can help you finance it.
Are All Bank Statement Loans the Same?
Not every lender provides identical terms for bank statement loans. For instance, some lenders may demand 12 months of bank statements, whereas others might require 24 months. The down payment prerequisites, interest rates, and DTI limits can also differ among lenders. Consequently, it is important to research and compare various non-QM lenders before deciding.
How to Find the Best Lender for Bank Statement Loans
Here are some tips for finding the right lender for your bank statement loan:
- Read Reviews: Be sure to look at online reviews to determine how other borrowers have rated the lender. Be particularly attentive to comments about customer service, the ease of the application process, and the lender’s responsiveness to questions or concerns.
- Ask Questions: Feel free to inquire with lenders regarding their loan terms, fees, and requirements. Being aware of these specifics from the beginning will prevent any surprises later.
- Compare Offers: Get quotes from multiple lenders to compare interest rates, down payments, and other important factors.
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Refinancing with a Bank Statement Loan
Did you know that bank statement loans aren’t just for buying homes? You can also use them to refinance your existing mortgage. If you’ve built up equity in your home, you could qualify for a cash-out refinance of up to 80% of your property’s value. That means you could get cash to pay off high-interest debt, fund home improvements, or invest in another property.
Why You Should Consider a Bank Statement Loan in 2024
If you’re self-employed and tired of the hoops you must jump through to qualify for a traditional mortgage, bank statement loans could be your answer. These loans can be approved using your cash flow instead of your tax returns. And in 2024, with lenders offering faster processing, lower down payments, and higher loan amounts, there’s never been a better time to consider a bank statement loan.
Ready to Get Started?
If you’re ready to take the next step toward buying or refinancing a home with a bank statement loan, it’s time to start gathering your bank statements. Reach out to a trusted lender like Non-QM Mortgage Lenders specializing in bank statement loans to begin the process and determine how much you can qualify for.
Frequently Asked Questions About Bank Statement Loans:
Q: What are Bank Statement Loans?
A: Bank statement loans cater to self-employed individuals. Rather than relying on tax returns or pay stubs for income verification, lenders analyze the previous 12 to 24 months bank statements to assess your cash flow and deposits.
Q: Who Can Benefit From Bank Statement Loans?
A: Bank statement loans are beneficial for self-employed individuals like freelancers, small business owners, and independent contractors because their earnings vary from month to month.
Q: How do Bank Statement Loans Work?
A: You submit 12 to 24 months of bank statements, and the lender utilizes them to assess your monthly earnings by examining your deposits. Bank statement loans do not necessitate tax returns or W-2s for eligibility.
Q: Do I Need a Good Credit Score for a Bank Statement Loan?
A: Most lenders typically demand a minimum credit score of 660 for bank statement loans. However, individuals with a higher credit score may qualify for more favorable loan conditions, such as a reduced down payment.
Q: What Kind of Properties Can I Buy With a Bank Statement Loan?
A: Bank statement loans can be used to buy a primary home, a second home, or even an investment property. This flexibility makes them a great option for all types of buyers.
Q: Can I Qualify for a Bank Statement Loan if I’ve Had a Bankruptcy or Foreclosure?
A: After experiencing bankruptcy or foreclosure, it is still possible to be eligible for bank statement loans. There are no rigid waiting periods, and lenders will primarily examine your recent bank statements to determine if you can manage the loan payments.
Q: How Much Down Payment Do I Need for a Bank Statement Loan?
A: The typical down payment for bank statement loans is around 20%, but some lenders may accept as low as 10% if you have strong credit and financials.
Q: Can I Refinance My Home with a Bank Statement Loan?
A: Yes, if you have enough equity in your home, you can use bank statement loans to refinance your mortgage, including cash-out refinancing.
Q: How do I Find the Right Lender for a Bank Statement Loan?
A: It’s important to compare lenders. Look at online reviews, ask about loan terms and fees, and get quotes from multiple lenders to find the best deal on bank statement loans.
Q: Are All Bank Statement Loans the Same?
A: No, not all lenders offer the same terms for bank statement loans. Some might ask for 12 months of bank statements, while others require 24 months. Down payment requirements and interest rates can also vary, so shopping around is a good idea.
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This blog about “Get Approved for a Mortgage with Bank Statement Loans Today” was updated on October 9th, 2024.