Shopping for a mortgage is always exciting. But the self-employed borrowers usually face hiccups at the very beginning of the mortgage application. If you apply for a conventional loan, you will be turned down during the pre-approval process. As a self-employed buyer, you can get a pre-approval with a bank statement home loan.
So, how do you prepare for the pre-approval of bank statement home loans in Houston? What are the necessary tips? Let’s have a look below.
Good or Average Credit
If you want to purchase a primary residence, you need at least 550 credit scores. Many lenders still expect a good credit score as the minimum benchmark. The lowest interest rates are only available if the borrower’s FICO score is higher than 760. In case your woe is related to low scores, you must prepare for a large down payment. 10% down payment and no mortgage insurance can be accessible; however, loan terms are not favorable. The monthly principal and mortgage rates are heavily dependent on the credit scores. For instance, a borrower with credit scores ranging between 620 and 639 might have to pay $1,288 per month for a $250,000 mortgage. Only if the same person had their credit scores between 760 and 850, the interest rate might be around $1,062. As you can see, you could save thousands of dollars with your credit scores. Furthermore, increasing credit scores will not incur extra payments but save your money.
Proof of Assets
You need your personal or business bank account to prove that you have funds for closing costs and down payment. It is important to prove that you have adequate cash reserves. This indicates your capability of staying afloat even during the months you cannot find work. Down payment indicated through a selling price differs according to the mortgage type. Most of the lenders demand private mortgage insurance or funding fees. If you want to get pre-approval for the bank statement home loan, you should pay attention to the debt-to-income ratio. Since steady employment has not been a regular thing for this type of borrowers, bank statement home loans cater to low- to moderate-income groups.
Proof of Income
It is quite natural that you cannot submit pay stubs or W-2s like the FHA or conventional borrowers. However, the bank statement mortgage lenders have not abolished the requirement of verifying payment. As the name suggests, lenders check 12 months of business or personal bank statements. They check whether you make a deposit of at least $10,000 every month in your personal account and $20,000 every month in your business account.
In the end, you should read property requirements about the bank statement home loans. You cannot get pre-approved if it is not a townhouse, approved condo, or single-family residency. Borrowers are also allowed to get 90% financing with more than 700 credit scores. You can also ask your spouse to co-sign on the mortgage, but his/her credit score leaves an impact. So, research before applying for a bank statement home loan in Houston!