12 Month Bank Statement Loans For Self Employed Borrowers

This BLOG On 12 Month Bank Statement Loans For Self Employed Borrowers Was UPDATED On June 24, 2017

Non-QM Loans and Bank Statement Loans For Self Employed Borrowers are back. No-Doc Loans and Bank Statement Loans For Self Employed Borrowers were really common and popular prior to the 2008 Subprime Crisis . 2017 is the year when Bank Statement Loans For Self Employed Borrowers can back. Until now, Self Employed Borrowers had a rather difficult time qualifying for home loans.

Here were the requirements for self employed borrowers prior to the comeback of 12 month bank statement loans for self employed borrowers:

  • A mortgage loan borrower needs income documentation in order to qualify for a residential mortgage loan. 
  • Qualifying income for self employed borrowers was a problem for business owners until now.
  • Now with the introduction of bank statement loans for self employed borrowers, business owners and entrepreneurs can qualify for mortgages of all loan amounts with bank statement mortgage loan program.

How Do Lenders Calculate Income For Self Employed Borrowers?

Self employed income calculations is determined by tax returns under traditional mortgage loan programs like FHA, VA, USDA, Conventional, and Jumbo Mortgages.

  • Mortgage Underwriters average the past two years of adjusted gross income when determining self employed income calculation. 
  • Most times than not, self employed mortgage loan borrowers write off as much as legally possible in order to declare the least income possible. 
  • This technique is great and advantageous to the self employed mortgage loan borrower but is a major hurdle and problem when it comes to qualifying for a traditional mortgage loan. 
  • There are some solutions to help self employed and business mortgage borrowers in obtaining a mortgage loan.
  • With 12 months bank statement loans for self employed borrowers, lenders will use deposits of bank statements and not withdrawals when calculating income.

Mortgages For Self Employed Borrowers

I strongly recommend that a self employed or business owner who is trying to get a residential mortgage loan to seek the advise of a mortgage banker or mortgage broker specializing in helping self employed borrowers and who have extensive knowledge in self employed income calculations instead of going to their local banker.

  • Every lender have different lending underwriting guidelines when it comes in self employed income calculation. 
  • There are lenders that can use part of the mortgage loan borrower’s assets in self employed income calculation. 
  • For example, say you have $300,000 in cash and/or stocks and you declare $40,000 on your self employed income taxes as gross income. 
  • The lender will consider taking 4% of assets of $300,000 and use that as part of annual income. 
  • So on this case, $300,000 x 4% yields $12,000 total income that the lender will use to underwrite mortgage loan will be $40,000 plus $12,000 for a total of $52,000.

 Verified Assets

Assets such as retirement fund, IRA, and/or 401k can be used as verified assets for down payment.  60% of the market value of retirement funds such as IRA and 401k can be used as liquid verified assets for down payment.

  • For example, say you have $200,000 in retirement funds. 
  • The lender will take 60% of the $200,000 which yields $120,000 and use it as borrower’s assets. 
  • They will then take 4% of the $120,000 to calculate additional income which is $120,000 x 4% which yields $4,800. 
  • The mortgage loan borrower can use the $4,800 as additional income on top of the $40,000 reported primary income on your income taxes.

NON-QM Mortgage Loans For Self Employed Borrowers

NON-QM Loans and Bank Statement Loans For Self Employed Borrowers are non-traditional mortgage loans.

  • They are also called portfolio loans because the loan stays in house with the lender that is funding it.
  • These loans cannot be sold on the secondary market. 
  • 20% down payment is required with NON-QM and Bank Statement Loans.
  • There is no loan size limits with NON-QM and Bank Statement Loans.
  • Mortgage Interest Rates are generally higher on bank statement loans than they are on Conventional Loans.

Other items that a lender can use in self employed income calculations is rolling the depreciation the borrower has listed on their Schedule C of their income tax returns.

Self employed or a business owners who need more information on bank statement loans for self employed borrowers, please contact us at 800-900-8569 or text us at 262-716-8151 or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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