The Lowdown on Adjustable Rate Mortgage...

Why a Bank Statement Loan?

Bank statements are monthly or periodic documents provided by your bank that summarize the financial activities and transactions within your account. They offer a detailed record of your deposits, withdrawals, transfers, and other financial movements during a specific time period. When it comes to bank statement mortgages, these statements serve as the primary proof of income, enabling borrowers, especially those with non-traditional income sources, to qualify for a home loan without relying on typical tax documents or pay stubs. For lenders, this means evaluating an applicant’s financial behavior over time through these statements to ensure the borrower’s ability to repay the loan.

Bank Statement Loan Requirements

Minimum Credit Score

While specific requirements may vary, most lenders will require a minimum credit score for bank statement loans. This score is typically higher compared to conventional loans, often ranging from 640 to 680 or higher.

Stable Income

Lenders will typically look for a history of stable income. This can be demonstrated through consistent deposits into your bank account over a specified period, usually around 12 to 24 months.

Bank Statements

As the primary documentation for income verification, you’ll need to provide bank statements covering a specified period, typically ranging from 12 to 24 months. These statements should reflect regular deposits that can be attributed to your income.

Self-Employment or Business Ownership

Bank statement loans are often favored by self-employed individuals or business owners who may have irregular income streams. You’ll need to provide evidence of your business ownership or self-employment status, such as business licenses, tax filings, or other relevant documentation.

Down Payment

The required down payment for a bank statement loan can vary, but it’s often higher than conventional loans. Expect to put down at least 10% to 20% of the home’s purchase price, although some lenders may require more.

Cash Reserves

Lenders may require you to have reserves, which are additional funds set aside in savings or other liquid accounts. This is to ensure you have enough money to cover mortgage payments and other expenses in case of unforeseen circumstances.

Debt-to-Income Ratio

While bank statement loans are more flexible than traditional loans, lenders will still evaluate your debt-to-income (DTI) ratio. This ratio compares your monthly debt obligations to your gross monthly income. Typically, lenders prefer a DTI ratio below 43%, but some may accept higher ratios depending on other factors.

Proof of Assets

In addition to bank statements, you may need to provide documentation of other assets, such as retirement accounts, stocks, or other investments.