Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines

This Article Is About Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines

Non-QM Loans and Bank Statement Loans are back. Gustan Cho Associates is a national mortgage company licensed in multiple states known for its no lender overlays on government and conventional loans as well as the dozens of non-QM loan programs we offer our borrowers.  Gustan Cho Associates has a national reputation for being a one-stop mortgage shop since we offer government and conventional loans as well as alternative financing loan programs and non-QM loans.

Some of our popular non-QM home loan programs include the following:

  • 12-months bank statement mortgage program for self-employed borrowers with no income tax returns required
  • Mortgage one day out of foreclosure and bankruptcy with no mandatory waiting period requirement
  • Asset-depletion mortgage programs with no income tax returns and/or W-2s required
  • P and L stated income mortgages with only one-year self-employment history
  • Non-QM Jumbo Mortgages with credit scores down to 500 FICO
  • Fix and flip mortgages for real estate investors

Non-QM loans are not hard money loans. Non-QM loans are not for borrowers with just bad credit. There are many qualified borrowers with strong credit profiles and high credit scores that benefit from non-QM loans.

Stated Income And Mortgages With No Income Tax Returns Are No Back

Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines

Gustan Cho Associates has one of the largest non-QM loan programs in the nation:

  • Non-QM mortgages are alternative home mortgage programs
  • Non-QM loans benefit borrowers who do not qualify for government and/or conventional loans
  • Non-QM home loans are portfolio loans with no maximum loan limit
  • 10% to 30% down payment requirements is normally required
  • There is no private mortgage insurance requirements on Non-QM mortgages
  • One of our most popular non-QM home loan programs is the 12-month bank statement mortgage loan programs for self-employed borrowers
  • Income tax returns are not required on the 12-month bank statement loan program
  • 12 months of deposits on bank statements is averaged and used as the monthly qualified income
  • Withdrawals does not matter and the account balance on the bank statement does not matter
  • If a borrower deposits $10,000 every month in their bank account and withdrawals $9,999.00, the $10,000 monthly deposits are only used and the withdrawals do not matter
  • Until now, self-employed borrowers had a very difficult time qualifying for home loans
  • Self-employed and business owners have the benefit of taking advantage of write-offs, commonly referred to as unreimbursed business expenses
  • This was due to the many write-offs on their income tax returns
  • Lenders use adjusted gross income as the qualifying income
  • Adjusted gross income is income after tax deductions
  • Tax Returns are not required on bank statement loans for self-employed borrowers at Gustan Cho Associates
  • Non-QM loans normally take 30 days or less  to process, underwrite, and fund
  • No-Doc Loans and Bank Statement Loans were really common and popular prior to the 2008 Subprime Crisis 
  • 2018 is the year when Bank Statement Loans For Self Employed Borrowers came back
  • Until now, Self Employed Borrowers had a rather difficult time qualifying for home loans

In this article, we will cover and discuss Bank Statement Mortgage Loans For Self Employed Borrowers Mortgage Guidelines.

What Are The Qualification Requirements For Bank Statement Loans For Self Employed Borrowers

Tax Returns are not required with our 12-month bank statement loans for self-employed borrowers.

We can use the following:

  • 12 months personal bank statements
  • 12 months business bank statements

If we use 12 months of bank statements, then 100% of deposits can be used. If we use 12 months of business bank statements, then 50% of the deposits can be used. Need to be a personal and/or business account from the same bank. Cannot have overdrafts and/or bounced checks.

Debt To Income Ratio And Other Requirements

20% is normally the preferred amount of down payment required on bank statement mortgage loan programs.

  • Borrowers with 720 credit scores are allowed a 10% down payment
  • Maximum debt to income ratios cannot exceed 50% DTI with compensating factors
  • Deferred Student Loans can be exempted from debt to income ratio calculations
  • Gustan Cho Associates has no cap on Loan Limits on Bank Statement Mortgage Loans and NON-QM Loans

There is no private mortgage insurance required on all non-QM loan programs.

12-Month Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines

How Do Lenders Calculate Income For Self Employed Borrowers?

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

  • The borrower needs income documentation in order to qualify for any type of home loans
  • 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 a bank statement mortgage loan program
  • We do not need income tax returns

The income is derived by adding 12 months of bank statements and averaging the 12 months to derive to the monthly income. Again, as mentioned earlier, 100% of deposits can be used on personal bank statements and 50% of deposits on business bank statements.

How Do Lenders Calculate Income For Self Employed Borrowers?

Self-employed income calculations are determined by tax returns on 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
  • More 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
  • However, it is a major hurdle and problem when it comes to qualifying for a traditional mortgage loan for self-employed borrowers
  • There are some solutions to help self-employed and business mortgage borrowers in obtaining a mortgage loan.

With 12 months of 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

Verified Assets

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

  • Every lender have different lending underwriting guidelines when it comes in the self-employed income calculation
  • There are lenders that can use part of the mortgage loan borrower’s assets in the self-employed income calculation
  • For example, say you have $300,000 in cash and/or stocks and you declare $40,000 on 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 in 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 funds, IRA, and/or 401k can be used as verified assets for the down payment.  60% of the market value of retirement funds such as IRA and 401k can be used as liquid verified assets for the down payment.

  • For example, say a borrower has $200,000 in retirement funds
  • The lender will take 60% of the $200,000 which yields $120,000 and use it as the borrower’s liquid 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 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 are no loan size limits with NON-QM and Bank Statement Loans
  • Mortgage Interest Rates are generally higher on bank statement loans and non-QM loans than they are on Conventional Loans

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

Self-employed or business owners who need more information on bank statement loans for self-employed borrowers, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

5 Comments
  1. Donna Smith

    I’m one year into my Chapter 13 repayment plan with on-time payments. I lost my house last year due to my attorney missing a status conference hearing. I would like to know if I’m qualified to purchase another home. I have a stable career (Registered Nurse), steady income (work for the State of California), and have not been impacted by the pandemic. Please let me know at your earliest convenience if you can assist me. Thank you for your time.

  2. Candy Frost says

    Looking to purchase a single or multi-family investment property in TN or FL. I have 20% to put down.
    Thank You

  3. Wanda Williams-Jones says

    My score is lower as I did working on a debt settlement for my unsecured debt. Never missed a MTG payment and outside of this settlement, where they encourage you to not pay, I have charged off accounts. I have already paid off all but 3. Looking for FHA or another Non- QM, and looking for lower down payment options. I understand no U/W overlays are added, and my scores are low 600’s. Real Estate in my town is crazy hot, and all new construction is selling out within days. I need to know what are my options, if any.

  4. Shannon Roy says

    Hello to Gustan Cho Associates and Capital Lending Network, Inc:
    My credit is not that great, i am currently in the process of getting it higher although this may take a while yet. I am a veteran with my COE for the home loan guarantee and i am looking to purchase a home with a little land in PA.
    please text or email
    thank you

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    Thank you.

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