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Understanding Bank Statement Mortgage Loans
Are you self employed in California or have a different source of income that isn’t always consistent? Do you have trouble getting banks to give you the time of day when it comes to getting approved for a home loan?
You’re not alone. Many self-employed borrowers or those who work on commission or other types of structures have issues getting banks to pay attention to them simply because they don’t fit the profile of a typical borrower. Banks are so risk-averse that they ‘ll shuffle their feet on pre-approval, and in a hot, ultra-competitive real estate market like California, that can mean the difference between getting the home of your dreams, and getting left behind.
Fortunately, a California bank statement loan can help.
What is a California Bank Statement Loan?
A California bank statement mortgage loan allows you to get qualified for a home loan with 12 months of bank statements and without the need for tax returns. These types of loans have amounts up to $3 million and can be used for your primary residence, as well as for purchasing a second home or an investment property.
The way a 12 month bank statement loan works is that the underwriter will calculate your qualified income by adding up the total of your bank statements across 12 months, and then dividing that number by 12 to get an approximate amount for your monthly income. That figure can then be used to determine how much you may qualify for in a home loan.
Plus, like traditional loans, you can choose between 15 or 30 year fixed rates, or 5/1, 71, or 10/1 ARMs. This is a great alternative to a conventional home loan or FHA loan.
Loan Features
- No tax returns required
- Qualified based on Personal or business statements for the most recent 12 months
- Loan amount up to $3 million
- 10% Down payment with no mortgage insurance
- Owner occupied, 2nd home, Investment Property
- Interest Only Loan Options
- 30-year fixed option available
- Non-Perfect Credit OK
- Gift Funds for Down Payment
- W2 co-borrower ok, income and employment traditionally verified
- Retirement income is usable with verification (1099, award letter, etc)
Requirements:
- 2 years of self-employment verified through CPA or business license
- Low number of NSF or O/Ds
- 12 month of mortgage or rental history
- 3 month reserves
Why Choose a Bank Statement Mortgage in California?
California’s diverse economy and high rate of self-employment make it an ideal state for bank statement mortgages. With a significant portion of the population relying on varied income streams, traditional income verification methods often fall short. Here are some reasons why a Bank Statement Mortgage might be the right choice for you:
Flexibility in Income Verification
Traditional mortgages require W-2s and tax returns, which may not accurately reflect the income of self-employed individuals. Bank statement mortgages offer flexibility by considering all income deposited into your account, giving a clearer picture of your earning potential. This flexibility is essential for many Californians who do not have a steady paycheck but still earn a substantial income. The ability to use bank statements as proof of income opens the door to homeownership for many who might otherwise be excluded. This method takes into account the entire financial picture, not just a snapshot of a single year.
By examining a more extended period, lenders can better understand the borrower's income trends and stability. This comprehensive approach to income verification is one of the key benefits of a Bank Statement Mortgage. It allows more people to qualify for a mortgage based on their actual financial situation, rather than being limited by traditional documentation requirements. This can be especially beneficial for those who have multiple income streams or irregular income patterns.
Higher Approval Rates for Self-Employed Borrowers
Many self-employed individuals face difficulties getting approved for traditional mortgages due to the unpredictability of their income. Bank Statement Mortgages consider the overall health of your business and cash flow, leading to higher approval rates for those with non-traditional incomes. This type of mortgage recognizes that self-employed individuals often have strong financial profiles despite the variability in their income. By focusing on bank statements, lenders can see the real earning potential and financial stability of the borrower. This results in a higher likelihood of approval for self-employed individuals.
The approval process is tailored to the unique financial situations of self-employed borrowers. Instead of relying on tax returns, which may not fully capture the borrower's income, lenders use bank statements to assess financial health. This approach can significantly improve the chances of getting approved for a mortgage. It is particularly beneficial for those who may have substantial business expenses that reduce their taxable income but still have a strong overall financial position. The higher approval rates make Bank Statement Mortgages an attractive option for many self-employed individuals in California.
The Benefits of a Bank Statement Mortgage for the Self-Employed
- Easier Qualification Process One of the key advantages of a bank statement mortgage is that it simplifies the qualification process for self-employed borrowers. Instead of providing complex tax returns or pay stubs, individuals can qualify using personal or business bank statements to prove their income. This alternative documentation allows lenders to assess income based on cash flow rather than taxable income, which often presents a more accurate financial picture for self-employed individuals.
- Flexible Income Assessment Self-employed income can fluctuate from month to month, making it difficult to demonstrate consistency through traditional documentation. Bank statement mortgages, however, offer flexibility by analyzing deposits over a 12- to 24-month period. This allows lenders to take an average of the borrower's income, smoothing out the fluctuations and providing a more comprehensive view of their ability to manage mortgage payments.
- Lower Documentation Requirements Traditional mortgage applications require extensive documentation, including tax returns, business profit and loss statements, and more. With a bank statement mortgage, the documentation requirements are significantly reduced. Typically, borrowers only need to provide 12 to 24 months of personal or business bank statements, making the process quicker and less cumbersome.
- Customizable Loan Terms Many lenders offering bank statement mortgages provide flexible terms, allowing borrowers to choose loan structures that best suit their needs. Whether it's adjustable-rate mortgages (ARMs) or fixed-rate options, self-employed borrowers have the ability to customize their mortgage terms based on their financial situation and future goals.
Competitive Interest Rates
Despite the flexibility offered, Bank Statement Mortgages in California often come with competitive interest rates, comparable to those of traditional loans. This means you can enjoy the benefits of a specialized mortgage without significantly higher costs. The competitive rates make these mortgages an attractive option for many borrowers. Lenders recognize the value of providing flexible mortgage options to a diverse range of borrowers. As a result, they offer competitive rates to attract more applicants. This ensures that borrowers do not have to pay a premium for the added flexibility of a Bank Statement Mortgage.
The interest rates are designed to be fair and competitive, ensuring that borrowers can manage their monthly payments effectively. This is particularly important in a state like California, where the cost of living is high. The ability to secure a mortgage with competitive rates helps make homeownership more affordable for many residents. This combination of flexibility and competitive rates makes Bank Statement Mortgages a practical choice for many Californians.
Tailored Solutions for Diverse Financial Situations
These mortgages are tailored to fit the unique financial situations of Californians, taking into account the state’s high cost of living and diverse economy. Whether you are a tech entrepreneur, a small business owner, or a freelancer, a Bank Statement Mortgage can be customized to meet your needs. The customization options make it easier for borrowers to find a mortgage that fits their financial situation. Lenders can work with borrowers to create a mortgage solution that matches their income patterns and financial goals.
This tailored approach ensures that borrowers can secure a mortgage that works for them, even if their income is non-traditional. The flexibility of a Bank Statement Mortgage allows for a more personalized lending experience. This is particularly beneficial in California, where the economy is diverse and many residents have unique financial situations. The ability to tailor the mortgage to fit the borrower's needs makes this type of loan an excellent option for many Californians. It provides a pathway to homeownership for those who might otherwise struggle to qualify for a traditional mortgage.
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How Can LBC Mortgage Help?
At LBC Mortgage, we have years of experience helping qualified borrowers get a great deal on their home loan. We work with a vast network of lenders who understand the unique needs of non-traditional borrowers such as the self-employed or those who have issues with their income documentation. To that end, we’re prepared to do the research and legwork needed to help you get the best possible deal on your bank statement loan in California.
That means taking the time to understand your goals for homeownership as well as your budget and other unique circumstances. It also means answering all of your questions to the best of our abilities. Even if you’ve been turned down for traditional mortgages by banks or other lending institutions, we invite you to contact us — we may be able to help you secure affordable financing where others could not.
Plus, 12 month bank statement loans are just one of the many types of loans we can help with. We also work with VOE loans, asset depletion loans and many other types of non-traditional loans that welcome those with alternative financing when a traditional mortgage might not fit your needs. So contact us today to learn more and learn how we can help you get approved and get financed.