Qualifying for a home loan with bank statements only is an option available only to people whose income is not from wages. The income on business taxes is not always a good reflection of how well a business (freelancer, contractor) is doing.
Before I go into details about bank statement only mortgage loans, Full Disclosure: Home Loan Mine is not a hobby. Many of the links on this site are affiliate links. If you buy or sign up for something though one of those links, I will earn a small commission.
If that is your situation and you want to buy or refinance a 1-4 unit property, you might consider bank statement mortgage loans.
Bank Statement Mortgage Requirements
- borrowers must have been earning non-wage income for 2 years
- they must meet credit requirements (varies by lender; generally, credit score of 640 or higher, no recent bankruptcies, foreclosures, deeds-in-lieu, mortgage lates)
- Low number of NSF’s (varies by lender)
- 100% gift funds allowed (by some lenders)
- business or personal bank statements
- some lenders allow only one account
- Maximum LTV’s vary based on what the economy as a whole is doing (80-90%) and type of loan (investment, second home, or owner-occupied)
- Some lenders only do detaches single family homes, townhouses and condos. Speaking of condos, some allow non-warrantable condos.
- Loan limits vary by lender, some stop at $2,000,000, some at $4,000,000.
You may have noticed a lot of qualifiers. That is because these are non-QM loans (Fannie Mae, Freddie Mac or a Government agencies don’t get involved in them). That means each lender creates a program based entirely on their wants and needs.
12-Month Bank Statements Mortgage Program
Most people seem to want a 12-month bank statement mortgage. If your past 12 months are better than the previous 12 months, it makes sense. Because lenders average all the months.
But if the difference is not that high, it might not be a good idea. When you show you qualify based on 12 months, lenders perceive you as riskier than if you do it based on 24 months.
That riskier perception translates into higher interest rates.
Home Loan With Bank Statements Income
Qualifying for a home loan with bank statements is simple, but not as simple as people think. Lenders do add up your deposits. But your deposits are not all considered income.
Lenders exclude certain deposits: refunds, transfers from another account you own, and unusual deposits. And it makes sense. They are looking to establish your typical and, therefore, likely to continue income from whatever activity you earn your money with.