12-Month Bank Statement Mortgage For Self-Employed Borrowers

This ARTICLE Is About The 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 economist’s 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 record
  • Unemployment hit a 50-year low
  • 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 in 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

12-Month Bank Statement Mortgage For Self-Employed Borrowers

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
  • 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
  • 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 divide 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 UnderwritersHow 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
  • 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 ScoresWhat are 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. For more information about our bank statement mortgage programs at Gustan Cho Associates, please contact us at 262-716-8151 or text us for a faster response. Or email us at [email protected] The Team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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