Bank statement loans make mortgages available to many individuals who might otherwise have a difficult time financing. This loan uses a different form of information to verify a home buyer’s income.
A bank statement loan may be the perfect option for you if you have a unique occupation or simply want to improve the terms of your mortgage.
1. Are you self employed?
Self employed home buyers are usually the people that would benefit the most from bank statement loans. Not having typical income forms or pay stubs could be hard for a self employed person to prove their income. Even utilizing tax returns will have its own set of issues, but most borrowers will reap the benefits from using bank statements, even if they have tax returns to verify their how much money they make.
Bank statement loans will allow self employed home buyers to prove months of financial data and demonstrate their ability to pay back loans. This will give the lender a good look as to how much a borrower can afford. The lender will still need to see certain expenses related to the company, but they won’t implement penalties for things you write off on your taxes. The use of bank statements ultimately allows you to fully utilize your income for the loan you need.
2. Do you have seasonal jobs?
Seasonal employees have similar problems as self employed individuals. If you earn a good amount of money throughout the year, but take a break during the winter, you may have a hard time getting approved for a loan during your off season.
Bank statement loans will allow you to clearly document how much you make, but you will most likely need to have been on a seasonal job for at least two years. The lender will calculate your salary for the full year and use this number to qualify for the loan. Bank statement loans also allow you to use other income forms, such as side work that is temporary, to assist you in getting approved for a mortgage loan.
3. Do you earn a commission-based salary?
Commission-based individuals, including sales representatives and employees whose jobs are based on specific performances, do not have a steady amount coming in that typical salaried earners have. One month a sale rep may earn ten thousand dollars, and in the next they may earn three thousand dollars. This unsteady income could make loan approval a hard task, but by using bank statements to prove income, these employees can get affordable loans.
4. Are you retired?
Retirement assets could be hard to use to qualify for a mortgage. In many mortgage applications, a borrower’s working income is used to get approved for a loan, but you don’t have a paycheck any longer. You could use retirement funds, but there is a specific and limited process for using retirement accounts such as pensions or IRAs.
Bank statement loans can make qualifying for a loan simpler, as long as you could use them to prove that you have a regular income from various retirement accounts. In many cases, you will have to prove that you have at least three years of income from your retirement account.
5. Do you want to reduce interest rates?
Depending on the type of loan, you might be able to reduce your interest rate by taking bank statements to the lender. Lenders usually like to see as much information as possible, and while there is definitely no guarantee that bank statements will reduce your interest rate, they may help. As you most likely know, the reduction of a single interest rate point could mean a good amount of savings over the life of a loan, allowing you to enjoy a more affordable payment on a nice home.
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6. Do you not a have a large down payment?
If you cannot save up for a large down payment, the lender is going to be very meticulous on qualification. They might request additional documentation, including verification of your assets and income. With bank statements, you might be able to get loan approval despite the fact that you simply don’t have a large down payment.
Want to learn more about bank statement loans? Click here to contact Lending Corner today!