Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines

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This BLOG On Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines Was UPDATED And PUBLISHED On February 2nd, 2020

Bank Statement Loans For Self Employed Borrowers Mortgage Guidelines

Non-QM Loans and Bank Statement Loans are back. Gustan Cho Associates Mortgage Group are direct lenders with no lender overlays on government and conventional loans.

  • Gustan Cho Associates is one of the largest correspondent lenders on bank statement mortgage loan programs for self-employed borrowers
  • Until now, self-employed borrowers had a very difficult time qualifying for home loans due to the many write-offs they state on their income tax returns
  • Tax Returns are not required on bank statement loans for self-employed borrowers with Gustan Cho Associates
  • We process, underwrite, and fund all of our bank statement mortgage loans and non-QM loans
  • 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 24-month bank statement loans for self-employed borrowers.

We can use the following:

  • 24 months personal bank statements
  • 24 months business bank statements

If we use 24 months of bank statements, then 100% of deposits can be used. If we use 24 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

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 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
  • The Gustan Cho Team at Loan Cabin Inc. has no cap on Loan Limits on Bank Statement Mortgage Loans and NON-QM Loans

Here are other requirements for self-employed borrowers prior to the comeback of 24-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 bank statement mortgage loan program
  • We do not need income tax returns

The income is derived by adding 24 months of bank statements and averaging the 24 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?

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
  • 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
  • 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 24 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

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

Verified Assets

Assets such as retirement fund, 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 borrower has $200,000 in retirement funds
  • The lender will take 60% of the $200,000 which yields $120,000 and use it as 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 a business owners who need more information on bank statement loans for self-employed borrowers, please contact us at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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