Bank Statement Mortgage for Self-Employed Borrowers
Many people who are business owners or receive a 1099 may agree that their tax returns don't really show their true income. They tend to write off many expenses that a salaried or W2 employee is not able to do. As a result, the income on their tax returns may not qualify for a traditional mortgage. The bank statement mortgage is an alternative income solution offered by certain lenders to help self-employed borrowers qualify for a mortgage without tax returns.
You Have 4 Available Loan Options
12 Month Bank Statement Loan Program
Borrower(s) provide the lender their most recent 12 months of personal bank statements showing deposits from work. Business account statements may be used as well.
24 Month Program
Borrower(s) will need to furnish 24 months of bank statements (personal or business) dating back from the last statement received. Example, if we are in the middle of April, then you'd provide 24 months back starting with your March statement.
1 or 6-Month Program
The 1 & 6-month program only allows personal bank statements to be used. Your middle credit score should be 720 or higher and maximum loan to value is 70 percent (or 30-percent down payment). You must be self-employed and have owned real estate in your name in the last three years.
The interest rate will be higher than the 12-24 month product since you are providing less income documentation.
Who Qualifies for the Bank Statement Mortgage Loan?
It's available only to self-employed borrower(s), business owners, or for two borrowers where one or more of the borrowers is self-employed for the last two years. This is a great solution for commissioned and 1099 borrowers who don't want to provide tax returns or sign IRS form 4506-T. You simply need to show proof of income by providing 12 to 24 consecutive months of bank statements.
Your Income & Deposits
A self-employed borrower's income is calculated by averaging 100% of work-related deposits from their most recent 12 months of personal bank statements. If your statements show low deposits for two or three months, then a large deposit the following month, the underwriter may request an additional 12 months to confirm your monthly income normally fluctuates.
For business bank statements, as much as 70% of the job-related deposits can be used, not 100%.
The maximum "Debt to Income"(DTI) ratio is 50%. Borrowers with a DTI of 43 or less receive a better rate & pricing.
Minimum Credit Scores Needed
680 or higher middle FICO scores. As much as 85% financing depending on appraised value
** Credit Scores of 620-679 are acceptable at lower LTV and higher interest rates
Refinance with cash back: 680+ credit = 75% financing;
Required Self-employment Documentation
A copy of their business license or "Articles of Incorporation" showing they have been self-employed in the most recent two years OR have a licensed CPA or enrolled IRS agent draft a letter confirming the same.
3 months of P.I.T.I
If loan amount is over $1 million, then 6 months. IF over $2M, then 12 months.
Acceptable Properties and Usage
Single family homes, townhomes, condos, condotel, duplex, triple or four-plex all qualify on various programs. Property usage can be as a primary residence, second home, or rental property.
Loan Amounts & Down Payments
- 90% financing up to $2,500,000* best rates with 740 and above credit scores
- 80% financing up to $2,000,000*
- Maximum loan as high as $3,000,000 with 75% financing (75 LTV on a cash out)
- Minimum loan amounts are $150,000
Which states is this available in?
We will have a loan officer help you if the property is located in California, Colorado, Florida, Georgia, Illinois, Idaho, Maryland, North Carolina, Oregon, South Carolina, Washington, Tennessee, and Texas.
These alternative income verification loans are not difficult when using an experienced loan officer.
Additional product information
This loan type is offered on a 30 year fixed-rate or adjustable-rate mortgages with 5, 7, or 10 year fixed terms then it becomes adjustable.
What is the ADVANTAGE?
No Tax Returns and No 4506-T signing. With the Bank Statement Loan program, your income is not reduced by tax deductions.
Reasons why a bank statement lender may have turned you down
1.) - Some lenders have business bank statement programs where they automatically reduce the income by 50% or more, so you may not qualify. Yes, that makes no sense because everybody doesn't have 50% expenses.
Fortunately, our loan officers have a program that reduces it by approximately 30%. We understand that self-employed freelancers or commissioned agents don't have expenses of 50% of their income every month.
2.) - Some lenders won't allow you to use 2 or more bank acccounts. We have a program that does allow 2 or more accounts to be used for income.
**Last updated January, 12 2018
Omni's main office is based in Southwest Riverside county so they can conveniently help borrowers in nearby Orange County, Los Angeles, San Diego, Ventura and throughout California.