Bank statement loans give borrowers with non-traditional income a chance to get approved for a mortgage. This isn’t your traditional loan from a Fannie Mae or Freddie Mac lender.
It’s a loan from a private bank that will use your bank statements in place of traditional income documentation, including pay stubs and tax returns.
There are many benefits of using a bank statement loan, but there are some downsides you should consider too. We always want to be fully transparent with our borrowers, so you know what you are getting.
The Pros of Bank Statement Loans
Like we said, there are many benefits of bank statement loans including the following.
A Competitive Alternative to Traditional Loans
Being self-employed shouldn’t leave you without the chance to get financed. If you have decent credit and can prove your income with your bank statements, you deserve financing. Bank statement loans still require proof of income, just in an alternative way.
You Don’t Need Perfect Credit
You don’t have to have great credit just because you’re verifying your income in another way. As long as you can prove beyond a reasonable doubt that you can afford the loan, you can usually get approved with an average credit score.
Bank Statement Loans Don’t Have PMI
Most banks don’t charge any type of mortgage insurance on bank statement loans. They are privately funded and not sold to investors. This means you don’t pay a higher monthly payment if you put down less than 20% on the home.
Rates can Still be Competitive
As long as you’re proving your income and making a down payment, you can often find competitive rates on bank statement loans. At Save Financial, we work hard to find you the best rates to save you the most money on your loans.
The Cons of Bank Statement Loans
Like any loan program, there are downsides you should consider.
You Need a Decent Length History in Business
You can’t get a bank statement loan if you just started your business. Most lenders want you to have at least 2 years of business under your belt before applying. This allows them to take a 2-year average of your income to qualify you for the loan.
You Might Need a Higher Down Payment
Many lenders require a down payment as high as 20%, but some will allow a 10% down payment. Either way, you’ll need a decent down payment to put down on the home. This makes up for the risk of not verifying your income the ‘traditional way.’
Many Lenders Don’t Offer Them
Many lenders avoid bank statement loans. However, at Save Financial, we work with some of the best lenders who do offer this loan program. We work hard to match you with the lenders that offer what you need and will fund your loan.
Final Thoughts
Bank statement loans are a great alternative for those who can’t verify their income the traditional way. It’s a simple way to get financing without paying excessively high rates or fees.
Since it’s a different program, not every lender has them but when you work with a broker with relationships with quality lenders, it’s easy to get the loan you need. Contact us today to learn more.
