​Empower Your Homeownership Dreams: Bank Statement Loans for Self-Employed Approval.

Are you self-employed? Have you been in business for at least two years? And have you been denied for a mortgage simply because you “didn’t show enough income” on your tax returns?  It just isn't fair. You work hard—and you deserve to buy a home just like everyone else.

Unfortunately, many banks routinely deny home loans to perfectly well-qualified applicants, just because of your tax returns. For many self-employed borrowers, using tax returns to qualify eliminates most banks and mortgage lenders from your list of mortgage options. 

If you’re fed up with this, and looking for a solution, look no further. 

When you're a business owner, you need a self-employed mortgage. One such mortgage program is called a BANK STATEMENT LOAN also known as a BANK STATEMENT MORTGAGE or a BANK STATEMENT PROGRAM. 

A BANK STATEMENT LOAN PROGRAM IS DESIGNED FOR BUSINESS OWNERS who have been in business for at least two years, and is having troubles qualifying for a traditional bank loan because they are not showing enough taxable income on their tax returns. 

WHAT IS A BANK STATEMENT LOAN?

BANK STATEMENT LOANS are a mortgage loan that works much like any other Conventional Loan or FHA loan you may have encountered, EXCEPT one key difference: the income calculation approach that lenders use for qualification. 

For instance, on a traditional mortgage, the lender uses the income shown on your tax returns; but on a bank statement loan, the lender counts the ordinary business deposits made through your BUSINESS BANK STATEMENTS as the income. 

With this program, you can say goodbye to traditional income documentation like bank statements, pay stubs, 1099's, W2, etc.

HOW DO BANK STATEMENT LOANS WORK?

Here’s a breakdown of how a lender counts the income for this program:

1.   First, you provide the lender with your bank statements for the account(s) where you make your business deposits.
2.   The lender counts the ordinary business deposits from those bank statements. Let’s say the most recent 24 months bank statements.
3.   Then the lender takes that total income figure and divide by 24 months. This will provide a monthly GROSS INCOME figure.
4.   Next the lender multiplies that figure by your ownership percentage of the business – let’s assume 100%.
5.   Finally, the lender applies a default business expense ratio of 50%*.  

THE RESULTING FIGURE IS THE MONTHLY INCOME THAT THE LENDER USES FOR QUALIFICATION PURPOSES. 

* If your business is operating at a lower expense ratio (as many businesses do), then you can supply a written statement from any licensed tax preparer that states your actual expense ratio. If the expense ratio is 40%, then the lender is able to use 60% of your gross average deposits as the monthly income for your loan. If the ratio is 30%, then the lender can use 70% of the gross average deposits, and so on and so forth.

Yes, it’s that simple---and this approach gives the lender a much better idea of your business’s true profitability and cash flow vs the tax return approach found with a traditional loan program.

 FEATURES OF BANK STATEMENT LOANS:

• 30 Year Fixed Rate Terms
• NO PMI: Regardless of your down payment
• Occupancy: Primary Res / Second/Vacation Homes/ or Investment Homes
• Eligible property types: SFR, Townhomes/Villas, 2-4 Unit Multi-Family Homes, Condominiums, and non-warrantable condos
• No Prepayment Penalties: there are no prepayment penalties as long as you are using this loan to finance a primary residence or second home. You can either to keep the loan for as long as you own the home, or refinance the loan into a traditional home loan program when you’re ready. The choice is yours.
• Loan Sizes: $100K - $3.5MM

BANK STATEMENT LOANS REQUIREMENTS:

• You must be in business for at least 24 months or longer
• You’ll need a minimum down payment of 10% of the purchase price. You can always put more money down if you like.
• You’ll need to provide at least 12 – 24 months of your business bank statements. If you don't have a separate business account and you use your personal bank statements instead, these statements can be used as well. 
• Deposit Activity: Your ordinary business deposit activity must demonstrate regular, recurring business deposits. It is normal for any business to have deposit activity that can vary up or down month-by-month; but the overall trend should be stable or increasing over time.
  If your business is seasonal, relies on only a few large deposits per year, or is a cash-based business, then you may want to check out another of our programs called a Profit & Loss Statement Loan)
• You’ll need a to provide the most recent 2 months of your personal accounts, including accounts such as checking, savings, money market, IRA, 401(k), stock accounts, etc.
• Minimum Credit Scores: credit scores vary by lender, but our bank statement program can accept scores as low as 575 (down payment and reserve requirements may be affected by credit score, ask your loan originator)
• Letter from a licensed tax preparer – verifying your ownership percentage of the business and your business’s expense ratio.
• Loan Application – you'll need to complete a standard Uniform Residential Loan Application. Our online application can be found HERE. 

If you’re an eligible self-employed business owner and you’ve gotten this far in business, it didn’t happen because you took “NO” as answer---so stop letting these big banks and credit unions tell you NO, when we have more reasons to say YES. 

To get the most current up-to-date information on Bank Statement Loans, check out our BANK STATEMENT LOAN PROGRAM PAGE or DROP US A LINE HERE.

Yours in successful homeownership,

Derek Bissen
Loan Originator
NMLS#365627
Unconventional Lending Program Director

​About the Author: 

Derek Bissen is a licensed Mortgage Loan Originator with over 25 years of experience in the industry. Derek is a self-employed lending expert who is known for his ability to work with borrowers who have substantial wealth and non-traditional lending needs. He is a creative loan structurer and specializes in portfolio lending, asset-based lending, bank statement lending, as well as traditional loans such as Conventional, FHA, VA, and first-time homebuyers.

Derek's expertise in the mortgage industry is unparalleled. He is a trusted advisor to his clients, providing them with customized loan solutions that meet their unique financial goals and needs. His vast experience and knowledge make him a valuable asset to anyone looking to purchase a home or refinance their existing mortgage.

As a highly-experienced loan originator and author, Derek is committed to sharing his knowledge with others. He regularly provides valuable insights and advice to readers looking to navigate the complex world of mortgage lending. His articles are informative, engaging, and backed by years of hands-on experience.

With his wealth of knowledge and dedication to his clients, he is the go-to source for all your mortgage lending needs. If you're looking for a reliable and trustworthy mortgage expert, contact Derek today to learn more about how he can help you achieve your financial goals.