Are you a self-employed professional, who is looking for a home loan program? Then, the bank statement home loan will be the ideal choice for you. Unlike traditional loan programs, this loan does not require you to provide the previous two years of tax returns, pay stubs, and W2s. Just as it sounds, this loan allows borrowers to verify his or her income only through bank statements.
And as there are several lenders, who offer bank statement home loans in Houston and the surrounding areas, getting the loan approval will not be difficult for you. But you can have some questions that you would like to be resolved before applying for the loan. To help you, here we have put together a few questions on bank statement home loans and their answers.
Who can qualify for this loan program?
Any type of self-employed professionals can opt for this home loan program. It includes entrepreneurs, business owners, gig workers, freelancers, contractors, and many other types of self-employed professionals with a 1099. If you are not sure whether you can qualify for this mortgage loan program or not, search online or get in touch with a reputable lender and ask them about this.
What are the advantages of this loan program?
Bank statement home loans come with plenty of advantages for a self-employed professional. With this loan, the lender will not look at your tax returns or the tax transcripts. Your income statements are made up of regular monthly income deposits. Besides, you can get the loan for as little as 10% down and do a cash-out refinance loan of up to 85% of the value of your property. Moreover, you can borrow up to $5 million. And typically, bank statement lenders will accept debt to income ratio of a maximum of 55 percent.
What bank statements do I need to show for this?
For getting the approval for a bank statement home loan, you need to show at least 12 months of bank statement, but it is better if you can show 24 months as they could help you get a lower mortgage rate. An experienced lender can help you determine whether you should use your business bank statements or your personal statements. This is why it is important to work with a lender who has experience in working with self-employed borrowers. As it is not a traditional loan, not all lenders will offer it. So, be careful when choosing a lender.
How income is calculated?
Income is calculated is a few different ways. If you provide a personal bank statement, 100% of the business-related deposits will be used. In case, you are using business bank statements, you can expect either 50% of the business related-deposits or more than that if a CPA letter and profit and loss statement ties to the bank statement period.
As you got the answers to the basic questions, now, you can proceed with the loan program. If you have further queries, ask your lender and work accordingly.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.