What Is a Bank Statement Mortgage Loan?
A bank statement loan is a home loan that does not require the traditional documentation that most lenders require to approve a loan. Instead, borrowers can provide bank statements to show their income.
Self-employed mortgages are designed for people who work for themselves or own businesses. The main difference between these and traditional mortgages is that self-employed mortgages are approved based on personal information and bank statements rather than tax returns or employer verification. This makes them a good option for people who don’t have a steady income or who work for multiple employers.
5 Benefits of Bank Statement Mortgage Loans
Here’s how self-employed individuals can benefit from bank statement mortgage loans:
- It Doesn’t Require Tax Returns or Pay Stubs. A regular lender would ask for tax returns, form W-2, or pay stubs to verify proof of income for an individual. However, this is impossible for self-employed individuals because they don’t have a standard employer.
- It Is Not Affected By the Debt-to-Income Ratio. Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes towards paying your debts. Lenders use this ratio to assess your borrowing risk and determine whether you can afford to take on more debt. A low DTI ratio means you have enough income to cover your debts, while a high DTI ratio may mean you struggle to make your monthly payments. However, when you apply for a bank statement mortgage loan, your DTI ratio is not a factor in determining your eligibility.
- It Offers High Loan Limits to Borrowers. A mortgage loan limit is the maximum amount a lender will give you for a mortgage loan. The limit is based on various factors. However, each lender can only give what it’s comfortable with. With bank statement loans, borrowers can get high limits based on the prevailing FHFA rates.
- It Requires a Manageable Down Payment. The report states that the most challenging part of the home-buying process is the down payment. Many homebuyers require assistance to fund their down payment. However, most lenders offer manageable down payments, which can be as low as three percent of the total mortgage cost. This makes it beneficial to self-employed individuals.
- It Can Be Used for a Primary Residence or a Second Home. There is no restriction on what a borrower can do with a bank statement loan. The loan can be applied to a primary residence, a second home, or an investment property.
Your Team at Buckhead Home Loans is Ready For You
Bank statement mortgage loans can be a great option for the self-employed. They offer several benefits, including using alternative forms of documentation to prove income, more flexible underwriting standards, and often a lower interest rate. While these loans may not be right for everyone, they can be a great option for self-employed people looking to purchase a home.
Buckhead Home Loans is a boutique brokerage shop that serves homebuyers and homeowners throughout the Fulton County Georgia area and throughout the states of Georgia, North Carolina, South Carolina, Alabama, and Florida. Our extensive network, a wide selection of loan products, and dedicated team of loan officers make it fast and easy to purchase a home or refinance. Let us help you secure a bank statement loan for self-employed individuals, so you can finally buy the home of your dreams! Get in touch with us today at (404) 303-7411 and let’s explore your options!