Bank Statement Loans for Self-Employed Borrowers
A bank statement loan is a mortgage for self-employed borrowers that uses your bank statements to verify income instead of tax returns.
If you write off a lot of expenses on your taxes and your taxable income looks low, a bank statement loan lets your actual cash deposits tell the real story.
Who it's a good fit for
Bank statement loans are built for self-employed borrowers, business owners, freelancers, independent contractors, and anyone whose income does not show up cleanly on a W-2. If you have been in business for at least 2 years, your bank statements show consistent deposits, and you have 10 percent or more for a down payment, this could be a great fit. It is especially good if your tax returns show low income because of legitimate business write-offs.
Who it's not a fit for
Bank statement loans are not for W-2 employees with straightforward income. If your income is easy to document with pay stubs and W-2s, a conventional loan will be cheaper. Bank statement loans also are not a fit if you have been self-employed for less than 2 years, or if your bank statements show inconsistent or declining deposits.
Requirements
Minimum Credit Score
660 or above (varies by lender)
Down Payment
10 to 20 percent minimum, depending on the lender
DTI Limit
Varies by lender, typically up to 50%
Reserves
3 to 6 months of PITI, depending on the lender
Pros and cons, stated honestly
Advantages
Things to consider
Costs involved
Bank statement loans are portfolio products, meaning the lender holds the loan rather than selling it to Fannie Mae or Freddie Mac. Because of this, rates are typically higher than conventional. However, most bank statement loans do not require mortgage insurance, which can offset some of the higher rate. Closing costs are similar to conventional, typically 2 to 5 percent of the loan amount. I compare multiple bank statement lenders to find the best rate and terms for your situation.
The process and rough timeline
Gather Your Statements
1 to 2 daysCollect 12 to 24 months of personal or business bank statements. I help you figure out which to use.
Get Pre-Approved
3 to 5 daysI analyze your statements, calculate qualifying income, and shop across multiple bank statement lenders.
Find a Home and Make an Offer
Varies by buyerYou shop with your agent. Your pre-approval shows sellers you are ready, even as a self-employed buyer.
Underwriting and Final Approval
10 to 14 daysThe lender verifies your statements, orders the appraisal, and underwrites the file. I handle the process.
Close and Get Your Keys
30 to 45 days totalYou sign, the loan funds, and you get the keys. No tax returns needed.