A bank statement mortgage loan is a type of loan where the borrower’s income is determined by the average balance of their bank statements over a period of time, rather than by traditional documentation such as pay stubs and W-2 forms. The bank statement loan is primarily used for self-employed borrowers who can’t provide traditional forms of income documentation. To qualify for a bank statement mortgage loan, borrowers typically need to meet the following requirements:
- Good credit score: Lenders will typically require borrowers to have a good credit score, usually a minimum of 620 or higher.
- Significant assets: Lenders may require borrowers to have a significant amount of assets to use as collateral, such as a substantial savings account or investment portfolio.
- Large down payment: A larger down payment can help offset the risk for the lender and increase the chances of getting approved.
- Self-employed: Bank statement mortgage loans are typically for self-employed borrowers who cannot provide traditional forms of income documentation.
- Bank statements: Borrowers are required to provide bank statements for the last 12 to 24 months, to demonstrate their ability to repay the loan.
- Property type: Bank statement loans are typically only available for owner-occupied properties and not for investment properties.
It is important to note that bank statement mortgage loans are becoming increasingly popular among self-employed borrowers, but they come with a higher interest rate, because of that it’s important to consult with a mortgage professional and understand the risks and benefits before applying for a bank statement mortgage loan.