How Bank Statement Loans Leverage Non-Traditional Income

While self-employment may offer freedom and higher earnings than salaried jobs for many, it can also be a roadblock when applying for a mortgage loan that requires traditional income documentation. Our Simple Access® Non-QM Bank Statement loan seeks to remedy that common issue by basing qualification on one’s bank records rather than pay stubs, tax returns, and W-2s. Let’s look at how this unique mortgage product works.

Meeting the Rising Tide on Non-Traditional Earners

The gig economy is growing. A Pew Research Center survey found that 16% of Americans earned money through an online work platform last year. Census data by the Economic Innovation Group (EIG) shows that Americans are filing to start their own businesses in record numbers in the wake of the coronavirus pandemic. Many of these millions of non-traditional earners are creditworthy and their bank deposits can prove it.

How are my bank statements calculated?

Your loan originator is looking at usable annual income. While this may vary by case, in general, that’s 50% of earnings deposits. Say, for example, a small-business owner can show regular bank deposits over a twelve-month period that amount to $300,000 annually. That would mean the potential borrower could have $150,000 of usable annual income (or $12,500 monthly) that’s used by the lender to determine the loan amount they qualify for.

Do Bank Statement loans rely exclusively on bank statements?

Not always. It could very well be the case that you’re a non-traditional earner, but your co-borrower partner has a W-2 job. Not a problem. Your income can be verified through your bank statements and your partner’s income can be evaluated using more traditional means, such as tax returns, W-2s, and employment verification.

What do I need to apply for a Bank Statement loan?

You’ll need to show at least one year of documented self-employment, and either 12 or 24 months of bank statements, from either a personal or a business account. You’ll also need a signed letter from a certified public accountant (CPA) verifying your business.

What more do I need to know about Bank Statement loans?

A versatile mortgage product, Bank Statement loans can be used to buy a primary residence, a second home, or an investment property for amounts up to $4 million. These loans can be for either fixed-rate or adjustable-rate mortgages.

There’s no need for traditional income documentation to stand between you and your dream home. Contact one of our loan originators today to talk about how a Bank Statement loan may be right for you.

Disclaimer: Please note that underwriting guidelines are subject to change and may have already changed by the time you are reading this post. Always check with a mortgage loan originator for the most accurate and updated information on loan requirements.