If you don’t have a consistent cash flow, you can consider a bank statement loan. They are also useful if you are unable to obtain proof of income from your employer. If you are unable to obtain a conventional or FHA loan because your income is typically adjusted for deductions and company write-offs on your tax filings. It may not accurately reflect your actual earnings.
Your bank statements, on the other hand, display your whole revenue. This may enable you to obtain a loan that you would not have been able to obtain otherwise. If you currently own a property, you can refinance it using bank statement loans. If you’ve left the traditional job since purchasing your house but still want to take advantage of the benefits of refinancing, these Bank Statement Home Loans in Houston may be a possibility for you.
What Is the Process of Obtaining a Bank Statement Loan?
Tax returns, W-2s, pay stubs, and employer verification papers are not required for bank statement loans. Instead, you may demonstrate your revenue and cash flow by using personal bank accounts or personal and company bank accounts.
As part of the loan procedure, you will still need to provide your lender with some standard papers. In fact, because verifying your income would be more complicated than for a traditional loan, you may have even more applications to fill out and documentation to give. Some of the items you may require for a bank statement loan include:
- Two years of self-employment experience
- A favorable credit score.
- Enough cash or liquid assets to cover several months’ worth of mortgage payments.
- Evidence of liquid assets, such as a 401(k) or investments
- A letter from your accountant confirming your business costs and confirming that you submit your tax returns as an independent contractor12.
The specifics will vary depending on the lender. Some mortgage lenders, for example, may accept lower credit scores than others. Some may accept monies as a gift. Because these loans represent a higher level of risk for lenders, you may be required to make a bigger down payment than you would for a traditional loan. You may also be subjected to a higher interest rate.
As a self-employed individual, a greater down payment and strong credit might also improve your chances of acquiring a mortgage. Borrowing from someone with a good credit score also helps.