You’ve likely heard of bank statement loans and wonder how they work. What would a lender accept for a bank statement loan? Can you really get approved without using your tax returns?
We’ve answered the most commonly asked questions about these loans below to help you understand.
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Who Should Use a Bank Statement Loan?
Bank statement loans are best for self-employed borrowers or anyone who gets irregular pay. Since lenders don’t look at your tax returns, it’s easier to get approved based on the money you actually earn rather than what you claim on your tax returns.
How do Bank Statement Loans Work?
Bank statement loans work just like any other loan. You must prove you have the credit score, income, and assets to qualify. Instead of using your tax returns as proof of income, though, you use your bank statements from the last 12 to 24 months.
Can you use a Bank Statement Loan on an Investment Home?
Yes, real estate investors use bank statement loans on investment homes all the time. It’s a great way to keep building your portfolio. Since real estate investors can take a large number of tax deductions, their tax returns usually don’t show their ‘true income’, but bank statement loans allow them to prove they can afford the loan.
Is Mortgage Insurance Required on Bank Statement Loans?
Bank statement loans don’t require mortgage insurance because they are privately owned. Mortgage insurance is required on traditional loans that are sold on the secondary market. Investors require insurance to protect their investment but there aren’t investors with bank statement loans so there’s no insurance.
Can you Use Bank Statement Loans for Refinancing?
Yes, if you want to refinance your home, whether a primary residence or investment property, you can use a bank statement loan. The premise is the same. You prove you have the income (with bank statements) and that you have all other qualifying factors to refinance the loan.
Many borrowers refinance to lower their interest rate or to tap into their home’s equity to use it for a down payment on another property.
Are Bank Statement Loans a Good Option?
When you work with the right lender, bank statement loans can be a great way to get the funding you need. If you’re self-employed, it can offer the lowest rates and best terms because you’re proving higher income which means a lower risk of default.
Like any loan, though, you should explore your options, getting quotes from at least a few lenders to ensure you are getting the best deal.
Final Thoughts
Bank statement loans are a great alternative for the self-employed. They make it a lot easier to qualify for a home whether to live in or as an investment. As you build your portfolio, chances are you’ll have more write-offs and lower income on your taxes, but bank statement loans help you keep getting the financing you need.
If you are looking for quality bank statement loans, contact Save Financial today and we’ll match you with the perfect lender!
