12 Month Bank Statement Mortgage For Self-Employed Borrowers

This article covers 12 Month Bank Statement Mortgage For Self-Employed Borrowers Until recently, most self-employed home buyers had a difficult time qualifying for a mortgage. Many self-employed home buyers often have the means to afford a higher-end home. Self-employed wage-earners have the luxury to write off many business expenses under the IRS Tax Code. Writing off business expenses from their gross income benefits self-employed wage-earners in paying less in income taxes.

What is a 12 Month Bank Statement Mortgage?

A 12 month bank statement mortgage uses statements from the past year instead of traditional income verification documents like tax returns or pay stubs. Self-employed individuals often prefer this option or those whose income sources must conform to the usual standards.

Lenders scrutinize the bank statements to assess income stability and ability to repay the loan. Borrowers should expect to provide detailed bank statements and meet additional requirements such as a strong credit score and a sufficient down payment.

It is important to thoroughly compare the terms and conditions of different mortgage options to determine the best option for one’s financial circumstances.

Mortgage Options With 12-Month Bank Statement Loans For Self-Employed Borrowers

Self-employed individuals, often assisted by adept accountants, frequently minimize their tax burdens by leveraging tax codes. Despite claiming numerous deductions resulting in negative income, many find it challenging to qualify for mortgages, particularly the 12 Month Bank Statement Mortgage. Traditional lenders typically rely on adjusted gross income to calculate qualified income.

However, there’s positive news for self-employed homebuyers seeking alternatives. Gustan Cho Associates offers non-QM mortgages tailored for self-employed borrowers, bypassing the need for income tax returns. This article explores non-QM bank statement mortgages, including those designed specifically for self-employed individuals applying for the 12 month bank Statement Mortgage. 

How Does The Bank Statement Mortgage For Self-Employed Borrowers Work?

The Bank Statement Mortgage For Self-Employed Borrowers offered at Gustan Cho Associates Mortgage Group works as follows:

• Must be self-employed.
• Qualified Income is derived by averaging the past 12 months of bank statement deposits.
• It can be either personal and/or business bank statements.
• Needs to be 12 months of bank statements from one bank.
• Only deposits count.
• Withdrawals do not matter.
• The borrower can deposit $10,000 per month and withdraw $9,999 the next day.
• Only the $10,000 deposit will be used for income.
• No bank overdrafts in the past 12 months.
• The average of the 12 months deposits is the monthly qualified income.

Income tax returns are not required. Income from bank statement mortgage loan programs will only go by the past 12 months of bank statement deposits.

What is Bank Statement for Loan?

A bank statement for a loan is a document provided by a bank that outlines the financial activity within a specific account over a set period. Lenders typically require borrowers to submit recent bank statements to assess income stability, spending habits, and overall financial health when applying for a loan.

Bank statements show deposits, withdrawals, balances, and transactions. Lenders use them to assess a borrower’s ability to repay a loan. Accurately submitting complete bank statements is crucial for a successful application.

How Do I Get My Bank Statement for a Mortgage?

To obtain your bank statements for a mortgage application, you typically have a few options:

1. Online Banking: Customers can access their statements through the bank’s online banking portal. To do so, they should log in to their account and navigate to the statements or documents section. From there, they can select the necessary statements for the duration specified by their mortgage lender.
2. Mobile Banking App: If your financial institution provides a mobile banking application, you can easily retrieve and download your statements directly from the app. Search for the feature lets you view the application’s statements or documents.
3. Bank Branch: You can visit your bank’s branch and request physical copies of your bank statements. Remember that fees may be associated with this option, and the bank may take some time to provide the statements.
4. Customer Service: Contact your bank’s customer service via phone or email and request copies of your bank statements. They can send them to you electronically or provide guidance on accessing them online.

When obtaining your bank statements, ensure that they cover the period specified by your mortgage lender and include all necessary information, such as your name, account number, and transaction history. Providing accurate and complete documentation to support your mortgage application is essential.

Other Lending Guidelines To Qualify For Bank Statement Mortgage For Self-Employed Borrowers

To qualify for the Bank Statement Mortgage and/or Non-QM Loans, borrowers should have 3 established credit tradelines that have been seasoned for the past 24 months. Verification of rent and/or past housing payment history is required.

Debt to income ratios cannot exceed 50% DTI. A 10% to 30% down payment is required. The amount of the down payment is dependent on the borrower’s credit scores, type of property, and credit history.

Non-QM Mortgage Loan Limits And Minimum Credit Score Requirements

The maximum loan limit is $3 million. Loan size over $3 million is underwritten on a case by case scenario basis and may require an additional down payment and reserves. There is no private mortgage insurance required.

Minimum credit scores of 500 FICO are allowed. The lower the credit scores, the higher the down payment requirement. Late payments in the past 12 months, including mortgage late payments, are allowed. There is no waiting period requirement after bankruptcy, foreclosure, deed in lieu of foreclosure, short-sale.

Non-QM Loans and Bank Statement Mortgage on primary owner-occupant home loans have no pre-payment penalty. 

Benefits Of Non-QM Bank Statement Mortgage

There are many benefits of Non-QM and 12 Month Bank Statement Mortgage For Self-Employed Borrowers. Non-QM Loans are not for borrowers with just bad credit. Many borrowers who qualify for government and conforming loans often benefit from Non-QM Mortgages. Here are the main benefits of using Non-QM And 12 Month Bank Statement Mortgage For Self-Employed Borrowers:

• Borrowers who exceed government and conforming limits
• Borrowers with late payments in the past 12 months, including mortgage late payments
• Borrowers who do not meet the mandatory waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short-sale
• Homebuyers needing a jumbo loan but have lower credit scores down to 500 FICO
• Self-employed borrowers who have little to no income or negative income on their tax returns can qualify with our Non-QM 12 Month Bank Statement Mortgage

For more information about the contents of this article or other mortgage-related topics, please contact us at Gustan Cho Associates at 800-900-8569 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. 

Mortgage Loan Requirements 12 Month Bank Statement Mortgage For Self-Employed Borrowers

The U.S. economy is booming. On Friday, November 6th, 2020, the Labor Department announced job growth numbers for November 2020. The numbers came in at $318,500 which far surpassed economists’ expectations.

This breaking news sent the Dow Jones Industrial Averages skyrocketing. All other major stock market indexes set a historic record with the job growth numbers report. Unemployment numbers at 3.5% set a record. Unemployment hit a 50-year low.

Mortgage Rates Lowest In Decades

Mortgage rates have been the lowest since the 2008 Great Recession. Many mortgage companies are launching creative mortgage loan programs such as the 12-month bank statement mortgage for self-employed borrowers. 12 Month Bank Statement Mortgage and subprime loans have been non-existent after the 2008 Credit Market Collapse.

What all this means is the U.S. housing market is on fire with no signs of any market correction in the near future. Many self-employed homebuyers have been shunned from the housing market until the 12-Month Bank Statement Mortgage was launched a few years ago. In this ARTICLE, we will cover and discuss 12 Month Bank Statement Mortgage For Self-Employed Borrowers.

How Does The 12 Month Bank Statement Mortgage Program Work

Self-employed borrowers have the benefit of deducting countless expenses associated with doing business. Until the introduction of our bank statement mortgage program, self-employed homebuyers had a rather difficult time qualifying for a home mortgage.

Unreimbursed expenses affect the gross income numbers when self-employed wage earners file their income taxes. The gross income less the expense deductions yields the adjusted gross income. Lenders will go off the adjusted gross income on tax returns when processing and underwriting qualified income.

How Self-Employed People Have A Hard Time Qualifying For A Mortgage

Due to the extensive deductions, self-employed borrowers often got to pay substantially less in taxes. However, self-employed wage earners with substantial unreimbursed business expenses had a difficult time qualifying for a home mortgage. However, with the 12 Month Bank Statement Mortgage loan program for self-employed borrowers, income tax returns are not required.

Borrowers need to provide bank statements for the past 12 months. The average monthly deposits are averaged for the past 12 months and that figure is used as the borrower’s monthly income.  Withdrawals do not matter.

How Is Income Calculated On 12 Month Bank Statement Mortgage For Self-Employed Borrowers?

Self-employed borrowers can now qualify for mortgages on purchase and refinance transactions without income tax returns. Since lenders go off adjusted gross income after tax deductions, qualifying for a mortgage was difficult until now. Mortgage underwriters do not need income tax returns when calculating 12-month bank statement mortgage loans.

Qualified Income Are The Average Of 12 Months of Deposits

Underwriters go off bank statement deposit averages over the past 12-months. The way underwriters calculate qualified income is by adding the total bank statement deposits for the past 12 months and then dividing it by 12. The yielding figure is the monthly qualified income used for debt to income calculations. Withdrawals do not matter. Borrowers can make a $10,000 deposit every month and withdraw $9,999 and the income used is $10,000.

Calculating Eligible Deposits By Mortgage Underwriters

Underwriters will carefully analyze each month of bank statements of the borrower for the past 12 months. They will take the end of the month date of statements. During the month, they will calculate the total deposits including irregular deposits. Deposits of non-business deposits such as alimony and/or child support deposits will also be taken into consideration.

How Mortgage Underwriters Analyze Bank Statements To Determine Qualified Income

Mortgage underwriters will exclude credit returns, account transfers, and credit card advances. All the above factors will be taken into considerations when calculating qualified income and debt-to-income ratios. 12-month bank statement mortgage guidelines differ from lender to lender. Either personal and/or bank statements can be used for bank statement mortgage loans. It can only be 12-month bank statements from one banking institution. It cannot be multiple bank statements from different banks.

Asset Depletion Mortgage Programs With No Income Required

Gustan Cho Associates offers asset depletion mortgage loan programs for borrowers who have no income but have substantial assets. A percentage of the assets is used as qualified income. The qualified income is derived by totaling all assets and taking a percentage of the assets through our income tool calculator.

The following are considered qualified assets:

• Stocks, bonds, and other securities
• Mutual funds.
• Vested amount of retirement account
• Bank accounts
• Other assets

Each of our various asset depletion investors has different ways of calculating qualified assets. Please read our asset-depletion article on Gustan Cho Associates. Freddie Mac also has an asset depletion mortgage program.

12-Month Bank Statement Mortgage Guidelines On Credit Scores

The minimum credit score requirements to qualify for Bank Statement Mortgage Programs are 500 FICO. However, the lower the borrowers’ credit scores, the higher the down payment requirements. To qualify for a 12 month bank statement mortgage, the minimum credit score requirements are 620 FICO with a 20% down payment.

For borrowers who have credit scores down 500 FICO, lenders will require 24 months of bank statements with a 25% down payment. Borrowers with over 720 credit scores can qualify for a 10% down payment home purchase loan. There are no maximum loan limit caps on bank statement loan programs. 

How Long Does The Borrower Need To Have Been In Business

Self-employed borrowers need to have been in business for at least two years in the same business to qualify for bank statement loan programs. The business needs to have been verified to have been in business for 24 months. Proof can be provided by providing the lender with a business license and/or other documents. Bank statement mortgage programs are available for owner-occupant homes, second/vacation homes, and investment properties.

What is an Interest-Only Bank Statement Mortgage?

A mortgage that is interest-only and based on bank statements is a loan where the borrower is required to pay only the interest for a set duration of time, which usually ranges from five to ten years. During this period, the borrower’s monthly payments consist solely of interest charges, without any reduction in the loan principal. This can result in lower monthly payments than traditional mortgages, where principal and interest are paid.

Once the interest-only term ends, the loan usually transitions into a fully amortized loan. This means that the borrower will be required to pay the principal and interest, increasing their monthly payments.

Interest-only bank statement mortgages are often sought after by individuals with fluctuating incomes or those who expect their financial situation to improve. It is important for borrowers to thoroughly evaluate the potential risks associated with interest-only mortgages, which may include the likelihood of significantly increased payments once the interest-only period ends.

For more information about our bank statement mortgage programs at Gustan Cho Associates, please contact us at 800-900-8569 or text us for a faster response. Or email us at alex@gustancho.com. The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

FAQ: 12 Month Bank Statement Mortgage For Self-Employed Borrowers

• 1. What is a 12 month Bank Statement Mortgage? A 12 month bank statement mortgage utilizes statements from the past year instead of traditional income verification documents like tax returns or pay stubs. It’s commonly favored by self-employed individuals or those with unconventional income sources.

• 2. How Does It Work? Lenders assess income stability and repayment ability by scrutinizing bank statements. Borrowers provide detailed statements and meet additional requirements such as a strong credit score and sufficient down payment.

• 3. How Can I Obtain My Bank Statements for a Mortgage? You can access statements through online banking portals or mobile apps, request physical copies at a bank branch (may incur fees), or contact customer service for electronic copies.

• 4. What is a Bank Statement for a Loan? A bank statement for a loan outlines financial activity within an account over a set period. Lenders require recent statements to assess income stability, spending habits, and financial health.

• 5. What Are the Eligibility Criteria for Bank Statement Mortgages? Borrowers typically need 3 established credit tradelines, verification of rent, debt-to-income ratios below 50%, and a down payment ranging from 10% to 30%, depending on credit scores and property type.

• 6. What Are the Benefits of Bank Statement Mortgages? These mortgages are for borrowers exceeding government and conforming loan limits, those with late payments, or individuals who do not meet the waiting period after financial setbacks like bankruptcy or foreclosure.

• 7. What is an Interest-Only Bank Statement Mortgage? This mortgage requires borrowers to pay only interest for a specified period (usually 5-10 years), resulting in lower initial payments. However, payments may increase substantially once the interest-only period ends.

This blog about 12 Month Bank Statement Mortgage For Self-Employed Borrowers was updated on April 8th, 2024.