​Bank Statement Home Loans - The Business Owner's Secret Weapon

​Have you been working as an independent business owner for at least 2 years? Have you been denied for a conventional home loan by a bank or credit union because you are not "showing enough income on your tax returns"?

This happens to entrepreneurs across the country. The reason has to do with how banks are forced to calculate your revenue using taxable income from a business owners tax returns. The U.S. tax code allows business owners access to a number of rules that act as tax-defense strategies. Tax professionals have a whole industry dedicated to reducing the tax burdens of business owners.

Running a business with an aggressive tax strategy means that life can be pretty amazing for a business owner...until they apply for a mortgage! While business owners have their own set of tax rules, banks and credit unions have theirs too. With a "traditional" home loan, like a Conventional, FHA, VA, or USDA program, banks and mortgage lenders are allowed to use only your tax returns to determine whether you can afford your monthly payments for your new mortgage.

In short - if you are telling Uncle Sam your business is not profitable on your tax returns - banks and credit unions are going to assume the same thing about your business. And if you're broke on paper, you are not considered financially capable of making the payments for a new mortgage, which is why so many business owner applications are denied. Yes, banks are aware of how the US tax code works, and they realize that there's a good chance that your business may well be doing quite well; but they are not permitted to make that sort of judgment call about your true income picture. Mortgage underwriting guidelines for traditional home loans can be very rigid in this respect.

So What's the Answer?

Our BANK STATEMENT HOME LOAN PROGRAM (sometimes referred to as a Bank Statement Mortgage) fixes this issue. Instead of calculating your income from taxes, we give a business owner the option of using the ordinary business deposits in the bank statements as the income for the new loan. We have found this generally provides us with a more accurate picture of the applicants real income picture and the business viability. 

Here's How it Works:

• STEP 1) First, we look at your company's last 12-24 months worth of bank statements, counting the regular business deposits.
• STEP 2) Divide this number ($) by the total amount of bank statements examined.
• STEP 3) Multiply that figure X the proportion of ownership (%) in the company that you own.
• STEP 4) And finally, we need to add in expenses (because most business in the real world have expenses). By default, we apply a 50% Expense ratio by multiply that figure above by 50%. The resulting number becomes the monthly income on your new loan application.

Here's a chart to better explain it. 

"So what happens if a Business is operating with an expense ratio below 50%?"

That's a great question! In reality, many businesses operate at an expense ratio that is well below 50%. If this applies to your business, simply supply your lender with a letter from a licensed tax professional stating your businesses exact expense ratio. For example, if your business operates on a 30% ratio, you could multiply the number from Step 4 above by 70%. 

There is no penalty for paying down both the first-time and second-time homes, so if desired, a loan may be refinanced once an applicant is eligible to receive a conventional loan on the house. Many of our clients have used this program to purchase a dream home, then decided to refinance it to a conventional loan as soon as they and their tax advisors have determined the optimum time. It allows an entrepreneur to be in control and purchase the home at the terms and timing that are right for them. 

If you're buying your dream home or luxury home with a luxury mortgage anywhere in Florida and you'd like more information, we offer a ton of free information and resources that will help you get quickly acquainted with this innovative program: BANK STATEMENT HOME LOAN RESOURCE PAGE. This page is designed to give you everything you need, along with free resources, FREQUENTLY ASKED QUESTIONS, document checklists, and more.

Be sure to check out our FREE VIDEO WORKSHOP, "Bank Statement Loans" that provides answers to all sorts of questions.

You won't find a BANK STATEMENT LOAN offered by banks or credit unions. Some lenders and brokers may offer this type of program, but very few provide the kind of educational resources and expertise that makes us the trusted leader in Bank Statement home loan financing in Florida.

Have a question? You can DROP US A LINE HERE. We'd be delighted to assist you!

Remember--stop letting these Banks and Credit Unions tell you NO, when we have more reasons to say YES.

Yours in successful homeownership,

Derek  Bissen
Loan Originator
NMLS# 365627
Unconventional Lending Program Director