A bank statement loan in Florida is a loan in which the borrower uses bank statements to qualify for financing. Typically, this kind of lending attracts self-employed borrowers who could benefit from using bank statements instead of tax returns.
Why is this even necessary? And here we get to the main problem — because self-employed borrowers often find it harder to qualify for a conventional mortgage, even if they have enough money. Therefore, this article will look at solutions that help self-employed people get a loan and achieve the dream of homeownership.
How does a bank statement loan in Florida work?
So, when you get a mortgage loan, you provide some documents about your income — because how else will the lender be sure you can pay the monthly payments? Typically, W-2 forms and tax returns confirm the taxable income the borrower has earned in the previous two years.
But what should a self-employed borrower do if providing traditional documentation may prove difficult? As you may have guessed, a bank statement loan solves exactly this problem.
Essentially, these loans do not use the standard methods of qualifying the borrower, so they’re considered a type of non-QM loan. Non-QM loans are mortgages that don’t fit the criteria for a qualified mortgage.
What is the main difference? Qualified mortgages are safer for consumers and more predictable for lenders. Non-QM loans are riskier for both the lender and the borrower. Therefore, they tend to be more expensive, with a higher interest rate, down payment, and closing costs.
Requirements for bank statement loan in Florida
If you want to qualify for a bank statement loan in Florida, then be prepared to meet several important parameters. You must provide 12 to 24 months of consecutive bank statements to get a loan. Thanks to these papers, the lender will be able to determine your net income.
Also, there are several other parameters that you need to keep in mind:
- 20% down payment required, or 10% with mortgage insurance
- Credit score not lower than 600
- 45% maximum debt-to-income ratio
- $1,000,000 maximum loan amount, $200,000 minimum
- Must escrow for taxes and insurance
- Minimum of 2 years self-employment or 1099 contract work with an exception could be made to 1-year self-employed if the same line of work was prior
If you need to know what loan you can qualify for based on your financial characteristics, we advise contacting LBC Mortgage. We will happily answer all your questions and help you find the best mortgage financing.
Where to get a bank statement loan in Florida
Bank statement loans are less popular type of loan than regular government-backed loans. But still, there are many lenders on the market that work specifically with these types of loans. By working with a mortgage broker, you can gain more information and explore different loan options — so schedule a free consultation to get started on your mortgage journey.
If you have a specific lender that you would like to work with, it is better to check whether they offer a bank statement loan in Florida. Not all lenders advertise their non-QM loans, so it’s best to ask.
Pros and cons of bank statement loan
The primary and most obvious advantage is the ability to use alternative documentation to verify your income. Traditionally, the borrower must provide W-2s and tax returns when applying for a mortgage. But self-employed borrowers don’t typically receive W-2s, and their tax returns often show them earning less than they actually earn. Therefore, bank statements are a great way to show the lender that you have the finances and can afford the mortgage.
The main disadvantage of such loans, as we wrote above, is the cost of the loan, which is usually more expensive than traditional financing options.
So, for example, a conventional loan may require a 3% down payment, while for a bank statement loan, you will need to save up at least 10% of the down payment. Compared to conventional loans, you can easily find options with a low credit score when a bank statement loan requires a score of at least 600.
Are you eligible for a bank statement loan in Florida — let’s find out together.
LBC Mortgage is a Florida mortgage brokerage company. We cooperate with 60 banks nationwide, providing our clients with a wide range of options.
Sign up for a consultation to find a loan that suits your needs. Our team will help you realize your dream of buying a home and make the process of getting a mortgage as simple as possible.