How Do Bank Statement Loans Work

Bank statement loans came about after the market crash of 2008. At that time, No doc loans were eliminated and self employed borrowers were unable to qualify for a mortgage using the income they document on their tax returns.

Lenders who offer Bank statement loans will use the average monthly bank deposits into your accounts to help determine the maximum loan amount you qualify for to purchase a home.

What is a Bank Statement Loan

A bank statement loan is a mortgage program that self employed borrowers use to purchase a home because their tax write offs are too high to qualify for a conventional mortgage. Bank statement loans are offered by portfolio lenders that will use your average monthly bank deposits instead of tax returns or pay stubs to qualify you for a mortgage.

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How do Bank Statement Loans Work

Bank statement loans work the same for all lenders who offer the program with a few slight variations.

Banks will ask you to provide 12-24 months of your past bank statements
You can submit either business or personal bank accounts
They will analyze your average monthly deposits and will apply a ratio against it (ie 50% of the average) determine your gross monthly income for the mortgage application.
The gross monthly income will be weighed against the other monthly obligations on your credit report through their DTI calculation to determine the maximum amount you can borrow.

Each lender may use a different percentage of your average monthly deposits depending upon whether you are submitting personal or business bank statements.

Who offers Bank Statement Loans

Bank statement loans are offered by portfolio lenders or Non QM lenders. These loans do not meet Fannie Mae guidelines so the lenders will either keep the loans within their own portfolio or they will sell them to investors.

To get a quote for a bank statement loan or to get a pre-approval, please complete this loan scenario form and we can provide you with a quote without pulling credit.

What are the Bank Statement Loan Rates

Rates for bank statement loans will be at least 1% higher than conventional mortgage rates. Lenders who offer the program will have a complicated price sheet or matrix which takes many factors into account when determining your mortgage rate.

Credit scores and the amount you put down will have the largest impact on the rate quote for a bank statement loan. The higher the credit scores and the more you put down, the better your rate will be.

Today, a rates for bank statement loans will be in the upper 3’s under the best scenario.