Bank Statement Loan vs Full Doc

If you’re planning to buy a home and are exploring alternative options to traditional  financing, you may have come across something called a bank statement loan. These loans can be very appealing to some borrowers, especially those who may be unable to qualify for a traditional full doc loan.

Bank Statement, Full Doc…What’s the Difference?

What’s the difference between a bank statement loan and a regular, run-of-the-mill mortgage? As the name implies, bank statement loans require statements from your bank account to determine whether or not you qualify for the mortgage. While bank statements usually aren’t the only requirement for these loans, they do replace the need to provide more traditional forms of income documentation such as W-2s, tax returns, or pay stubs. For people with fluctuating income, such as those who are self-employed or entrepreneurs, bank statement loans provide an alternative avenue to homeownership.

By contrast, full documentation or “full doc” loans generally require all income and assets to be documented and verified based on the standards of the lending instutution. Full doc loans typically require multiple official documents to prove that the borrower earns enough money to qualify for the loan. Some of these documents may include the following:

• W-2 form
• Recent paystub
• Tax returns for the past two years
• Profit and loss statements
• Social security statements
• Veteran benefits statements

Full doc loans also may require documentation pertaining to the borrower’s debts and assets. These documents may include the following:

• Titles to motor vehicles
• Stocks, bonds and other investment statements with current market values
• Credit card bills
• Student loans
• Alimony or child support

Would a Bank Statement Loan Work For Me?

A bank statement loan could make perfect sense for you as a home buyer if you…

• are self-employed
• are an entrepreneur or investor
• have fluctuating/inconsistent income
• are a freelance worker or contract worker
• have ample funds in either personal or business bank accounts or both
• have a credit score of at least 580

If the statements above do not apply to you, then a full doc loan with traditional income verification requirements may make more sense. If you’re not sure which loan option would be best for your scenario, you can talk to one of our lending professionals for guidance.

Bank Statement Loan Qualifications

Different lenders may have different requirements for their bank statement loan offerings. At Luxury Mortgage, our Bank Statement Qualifier Loan requires the following basic qualifications:

If Using Personal Bank Statements:

• The most recent 12 or 24 months of statements and the most recent 3 months of business statements are needed.
• Applicant must utilize 100% of deposits into personal accounts as income.
• Deposits must be sourced.
• More than one account may be used.

If Using Business Bank Statements:

• The most recent 12 or 24 months of statements
• To determine dollar amount to be used as income, multiply all eligible deposits by 50% and again by the borrower’s ownership percentage in the business.
• Eligible deposits are those that can be sourced as business income.
• More than one account may be used.

In addition to the above, Luxury Mortgage’s Bank Statement Qualifier Loan also has the following requirements/features:

• Credit scores as low as 580
• Borrowers can borrow up to 80% of the property value
• Loan amounts up to $6,000,000
• Competitive pricing

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