Bank statement loans for self-employed individuals are becoming a more and more popular option among said population. It is an excellent alternative to traditional mortgages because you can use bank statements to prove your income.
Bank Statement Loans for Self-Employed Individuals
Most traditional home loans would require applicants to submit W-2 and tax returns to gauge their ability to repay the loan. However, we understand that this is just not possible for some people, even though they have the finances and means to make the monthly payments.
This is because people who are self-employed may not have a W-2 or a consistent income, and bank statements may be able to capture their financial capabilities better.
Self-employed individuals tend to earn higher, and another benefit of a bank statement mortgage is that the loan limit is usually higher. This can be great if you are looking to purchase homes that are more expensive than the average cost.
Moreover, a bank statement loan doesn’t have to be used only for primary residences. You can use the loan to purchase a second home, holiday property, or even investment houses.
If you have a higher debt-to-income ratio, this also shouldn’t be a problem. DTI ratio calculates the percentage of your gross income that goes to pay any debt you have, which can include rent, credit card, mortgage payments, and other debts.
Debt is often a huge part of owning a business. However, we recommend keeping your personal and business expenses separate so that any business-related debt doesn’t count to your personal credit score and DTI.
Do You Need a Bank Statement Loan?
So, are you the right person to get a bank statement loan? What different types of self-employed people would benefit from a bank statement mortgage? The bottom line is that if you are self-employed, you probably are.
The list may include entrepreneurs and business owners, as well as freelance workers, contract workers, and gig workers. The field that you work in does not really matter. Not to mention real estate brokers, lawyers, doctors, and other types of professionals who run their own enterprise.
This is because their income may vary from month to month, and tax returns may not be very accurate when representing it. Additionally, you may need to submit either 12 or 24 months of bank statements, which means you have to be self-employed for at least the last two years.
Some workers may also need a bank statement loan if their income is not received in the traditional way. For instance, some companies pay their employees using prepaid cards instead of direct transfers and deposits.
Get Approved Today
To get approved quickly for a bank statement home loan, it’s important to pay attention to all the requirements and submit any necessary documentations.
Meanwhile, if you’re still trying to look for a lender that provides this type of loan, a mortgage broker may be able to help out. Make sure to compare multiple options before choosing a lender to ensure you get the best rates!