If you are a self-employed homebuyer you may be familiar with the difficulties of qualifying for a standard conventional mortgage that requires two years of tax returns. Bank Statement jumbo loans make approval easier by allowing borrowers to qualify based on a 12-month or 24-month bank statement average income.
If you’re considering purchasing a home but are self-employed, read on to learn more about this unique lending option.
Jumbo Bank Statement Mortgage Benefits:
The main benefit of jumbo bank statement loans is that it allows self-employed buyers to qualify for a loan without providing two years of tax returns, W2s, or paystubs. Instead, lenders will look at the borrower’s income history over the past 12 or 24 months and use that to determine their ability to repay and whether or not they are eligible for financing. This can be particularly helpful in situations where borrowers may have had difficulty filing taxes or have seen a recent increase or decrease in their income.
In order to qualify for a bank statement loan, buyers must provide documentation of their income. This includes personal and business bank statements from the previous 12 months and proof that all deposits were made legally. The mortgage company will then analyze these documents to determine your average monthly income over the past year and use this amount to calculate your qualifying income.
In addition to only requiring 12 months of statements, this type of loan is also typically more flexible when it comes to credit scores. While having a higher score is still recommended, many lenders and banks are willing to consider applicants with lower scores if they can provide sufficient evidence that they are able to afford the loan.
Bank Statement Mortgages Are Helpful For:
- Business owners
- Retired borrowers
- Independent contract workers
- Sole proprietors
- Real Estate Agents
Jumbo Bank Statement Loan Limits & Credit:
- 12- or 24-month bank statements, using either personal or business accounts.
- 2-year min self-employed required
- Must own at least 50% of the business to use business bank statements, 25% for personal
- For owner-occupied single-family purchase
- Borrowers should have 720+ credit when financing the max 90% loan to value. Lower credit scores are permitted with a greater down payment of over 10%
- Loan limits: 90% financing up to $2,000,000 loan limits
- Loan limits: 85% financing up to $3m
- Higher loan amounts over $3m are permitted with a larger down payment
- NO PMI mortgage insurance
- Available with either fixed interest rates or adjustable rate options
- Available for purchase, regular refinance up to 90%, and cash-out refinance up to 80% loan to value
Lastly, buyers should be aware that bank statement loans will typically come with slightly higher interest rates than traditional mortgage loans. This is due to the added risk associated with self-employed applicants and the fact that these loans may require more paperwork and documentation.
Since bank statements loans are a type of non-QM loan, they’re not regulated or approved like standard Fannie Mae home loans. Many lenders make their own internal assessments when it comes to qualifying and eligibility. If you are a self-employed homebuyer, the bank statement program may be a great option for you.
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