Life as a self-employed person can be quite tough, especially when it comes to acquiring the financing one needs. Despite being a dynamic and versatile world, things are complicated for the self-employed.
From consultants to small businesses and freelancers, they have great flexibility. But keep in mind just as the benefits are higher, there are also a lot of struggles. Luckily, to keep up with the difficulties, there are now multiple financing solutions available for self-employed people who cannot show a fixed monthly income.
This is where the bank statement mortgage loan offers great flexibility and reliance. If you are new to it or if you are unaware of the bank statement programs, then the details here will surely be helpful for you.
Understanding bank statement mortgage loans
When applying for a mortgage, the lenders generally ask the borrower to verify the income. However, this becomes tough if the borrower is self-employed, as the lenders cannot verify a self-employed person’s income with the same paperwork they use for salaried employees.
Thus, things are complicated. This is why the lenders require tax returns and additional proof of income in such cases.
Generally, the lender checks and confirms the income using the bank records for the bank statement mortgage loans. The borrower must provide documentation of their financial activity, including deposits, income, and withdrawals, to qualify for the mortgage.
How do bank statement loans work?
In the case of bank statement loans, the lender will check your bank statement instead of asking for traditional income proof to verify your ability to repay the loan. So, if you have been in business for two or more years, then it will be absolutely worth considering the following steps to begin with the mortgage process.
Find a salary-based mortgage consultant
The most important thing to do is find someone who will be there to listen to you before offering any sensible options. A good salary-based mortgage consultant will let you know about creating a custom loan. They will never pressure you during the process. Also, you need not pay any hidden or upfront fees.
Be in business for 2 or more years
Generally, lenders prefer working with those borrowers who have been working in the industry for at least two years. This makes them comfortable knowing that you have been working as a self-employed person or owning a business for a while.
Remember, you will struggle to get a bank statement loan if you have just started out your business or it’s only a few months old.
Provide the necessary documentation
Before you talk to any lender, you need to take your time to gather information and documentation such as your business license, 24 months of business bank statements, one year of personal bank statements, and the expense ratio, along with an assigned CPA letter which states you are still running your business.
Also, you must be prepared to provide additional documentation upon request, as some of the lenders will also require other information.
Get access to your loan
Once you have talked to the consultant and you have all the required documentation, your loan can go through the underwriting process. There is nothing to worry about, as everything will go smoothly. You just need to get ready to answer a few questions. After the underwriter reviews and approves the file, you will be ready to receive a custom loan that will help you build your dream home.
Benefits of bank statement mortgage loan
When you get your bank statement mortgage loan, you will get a comprehensive overview of your complete financial health. It will showcase regular incomes, financial responsibilities, and spending habits simultaneously.
Thus it makes it easy for the lender to identify if you are capable enough to repay back the loan on time.
The lenders who provide bank statement mortgage loans understand the unique financial situation of self-employed people and generally have got more flexible requirements regarding debt-to-income ratio, credit score, and business longevity. You need to take your time to research the lenders and see who can be a bit lenient and offer your business the right support.
In contrast to the other types of business loans, different types of mortgage lenders can approve mortgage loans quickly as there is no waiting for tax return verification. The mortgage process with different types of mortgage lenders is streamlined and easy to complete
Before you go ahead with a specific lender, it is important to remember certain things. It will guarantee you can get a loan that works in your favor.
It is essential to know that the bank statement mortgage loans have got a slightly higher interest rate than the other loan options. This clearly reflects the alternative nature of the verification process, as the lender is taking a huge amount of risk. The interest rate is higher to cover up for any loss that can happen.
The borrowers need to ensure they have well-organized, comprehensive, and genuine bank statements to offer the lender. Any gaps here can cause delays or denials in the loan.
Who should consider a bank statement mortgage?
Generally, bank statement mortgage loans are meant for the self-employed individual, but they can also benefit other people with non-traditional income strains
- The freelancers have varying incomes.
- Business owners with significantly high business-related skills right off.
- Real estate investors with depreciation, which can majorly impact the AGI.
- Or anyone who has tax return issues that don’t reflect their actual earning potential.
Getting a mortgage loan, no doubt can be tough, but if you are looking for support, you can consider getting help from Private Capital Investors. They have got the best experts in town.
No matter what type of loan you are looking for, the professionals will be there to guide you in the right direction.
They will ensure you acquire the financing within a short span of time and you have all the support you require. They are ready to make the process seamless and hassle-free for you.