Bank Statement Loan: What Kind of Mortgage Is It?
A bank statement loan is a mortgage option for those who can’t qualify for a traditional loan. For instance, self-employed borrowers and freelancers often struggle to show their real financial situation via conventional underwriting. Unfortunately, when they use a tax strategy to lower taxable income, they also decrease mortgage eligibility no matter how strong their cash flow is. Here is when bank statement loans become extremely handy, as they focus on deposit activity.
This loan type is a non-QM (non-qualified mortgage) that accepts business or personal bank statements for application. Lenders pay attention to deposits over a 12- to 14-month period, analyze average income, and use that information to evaluate loan eligibility.
Bank statement loans don’t have any tax return requirements, so you can avoid legitimate business explanations. You provide less documentation, and as a result, the approval takes less time than traditional mortgages. Bank statement loans are quite versatile when it comes to property types. They cover various investment properties, primary residences, and second homes.
Documentation Checklist: What Do You Need for a Bank Statement Loan?
Identification
Naturally, to qualify for any mortgage, you need to confirm who you are and that your claims are legal. You can use your ID, including a passport or driver’s license, to confirm your identity. For credit verification and checks, you will also need to provide an SSN or ITIN. Also prepare recent utility bills and lease contracts to prove your residency.
Statements From The Bank
It is vital to demonstrate your income patterns to prove financial stability. For instance, you will have to show 12 to 24 months of bank statements on a business or personal account. Most lenders ask to show a year, but two years will strengthen your application and increase chances for better terms. All statements need to be taken from the same bank account to verify your income reliability. It is better to include all the pages, including blank ones and with minimum activities. Missing pages may be the reason for approval delay.
Business-related Documentation
If you are working on a self-employment basis, you will have to prove that your business is legal and is active for a sufficient time. It means that you will need to show that you have been self-employed for at least two years to be reliable enough in the eyes of lenders. If it is possible, you can also provide your current business license.
Legal business formation documents are also essential for fast approval, so make sure that you can demonstrate registration or incorporation papers if they are available. Also, a CPI letter will be valuable for verifying that the business belongs to you.
Statements for Loss and Profit
These statements are not always necessary, but they can provide lenders with better insight into the financial state and income of your business. Basically, they serve as extra proof that your income is reliable and you will not have problems with repayment. If you do it yourself, keep in mind that accuracy and detailed information are essential for the application. Profit and loss statements should cover the same period as statements from your bank.
Documents Related to Mortgage and Property
If you are planning to buy or refinance your existing property, you will need to provide transaction-specific documentation, for instance, a purchase agreement. The agreement should be signed and contain all details about the property and the price for the house purchase. Also, if you have a real estate agent, be ready that you will have to provide their contact information. These documents help confirm transaction details and discuss required nuances with all involved parties.
After your mortgage application, a lender will also request an appraisal to check your property’s market value. Once the evaluation is done, you will also receive a copy of a prepared report. A lender also provides an estimated closing disclosure with a final closing disclosure.
Authorization
Accessing your credit history is essential for proper application processing, so first of all, you will need to sign a borrower authorization to give the lender permission to check information and access required records. Also, the lender will need access to credit reports. Also, you will need to complete a loan application form, which contains personal information, details about employment, debts, assets, and the requested loan amount.
How Can LBC Mortgage Help to Get a Bank Statement Loan?
As an experienced mortgage broker, LBC Mortgage can help you qualify for a loan with the help of bank statements instead of tax returns or W-2 forms. We know how to increase your chances for a loan based on your average monthly income noted in the deposit history. With us, you can get a loan suitable for your current financial situation or apply for a refinancing.
Bank statement loans are more flexible in comparison to conventional mortgages, but their interest rates are often higher. Down payment requirements are also larger, and you may face stricter criteria for underwriting. LBC Mortgage’s bank statement loan program could provide a more effective path to qualify for a mortgage, while our experts will support you at every step of the process, ensuring a smooth application.
Start Your Preparation for a Bank Statement Loan Today
Self-employed borrowers require really flexible financing solutions, and a bank statement loan is an option that can fully match your financial situation and current goals. But choosing the suitable program is only the first stage. Proper preparation and making sure all required documents are ready will free you from any extra delays. With the checklist above, you have a direction where to start. Also, LBC Mortgage is always ready to assist with the application process, making it smoother and significantly faster.