What you should know about bank statement mortgage?

Buying a home is one of the best things you can do to invest in your future and build equity. However, getting approved for a mortgage can be challenging if you're self-employed or have an inconsistent income.

Bank statement mortgages provide a solution to this problem by considering your income based on your bank statements rather than tax returns. This blog discusses what you should know about bank statement mortgages, including their requirements and benefits.

How do bank statement mortgages work?

A bank statement mortgage is a loan program that considers the borrower's income based on their personal or business bank statements rather than tax returns.

Lenders look at several factors to determine a borrower’s income, including:

  • The average balance in the account
  • Number of deposits
  • Consistency of the deposits

A bank statement mortgage is designed for those whose tax returns may not accurately reflect their financial circumstances, such as:

  • Self-employed individuals
  • Independent contractors
  • Those who can’t document their income through tax returns

Many ways to earn a living aren't accurately reflected in a tax return. Even if you're not ready to purchase a home, speaking with an experienced loan officer can give you insight into the application process and the steps to make your bank statements appealing to a lender.

Organizing your finances early in the home-buying process will make your journey to ownership much less stressful and can even help you to secure better terms for the loan.

What are the requirements for a bank statement mortgage?

To qualify for a bank statement mortgage, borrowers must have at least 12 to 24 months of bank statements, and the average balance in the account must be consistent and sufficient to support the loan amount.

Lenders also look for a minimum deposit amount and require the deposits to come from a legitimate source of income.

There are still the traditional mortgage requirements as well, including:

  • A good credit score
  • Low debt-to-income ratio
  • A satisfactory debt history

What are some of the benefits of bank statement mortgages?

One of the main benefits of bank statement mortgages is that they’re e a flexible solution for self-employed people or have inconsistent income.

Evaluating a borrower's income based on bank statements avoids the need for tax returns. It’s a straightforward way to avoid the difficulties of documenting income when you don’t have a traditional 9 to 5 or salary.

Additionally, bank statement mortgages often have a faster application process, and the loan terms can be more favorable than traditional mortgage loans.

Things to consider when seeking a bank statement mortgage

While bank statement mortgages offer many benefits, there are also some considerations to keep in mind.

The interest rates for bank statement mortgages are often higher than traditional mortgage loans, and the loan terms may be less favorable.

Give yourself plenty of time to find the right lender for your needs because requirements vary between institutions. Shop around and compare all your loan options before making a decision.

Learn more about bank statement mortgages and apply for one with help from Mortgages By Jill

Even if you don’t have a traditional income, it doesn’t mean buying a home is out of reach. Bank statement mortgages offer a solution by considering the borrower's income based on their bank statements.

Jill Burgess is a preferred loan officer with the North Carolina Finance Authority. She’s a professional with over 30 years of mortgage experience, eager to help self-employed individuals find the right lending solution on their journey to home ownership.

No matter your situation, Jill provides the same professional, personal, and passionate service. Apply for a bank statement mortgage today.

Image of a house that was purchased using a bank statement mortgage.
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