For granting a home loan, mortgage providers verify the income source of the borrower. Typically, the verification is done based on the W2 tax forms. However, this can create a problem if you work as an independent professional, such as a freelancer. The reason is that freelancers, owners, gig workers and contractors don’t have the tax forms to present. This is where the bank statement mortgages play their roles.
Here is how it works. All you need to do is prove your source of income by presenting your statements for a year or two. Read on to find out more.
What is a Bank Statement Mortgage?
With a bank statement mortgage, the lender can verify your income with the help of the bank statements instead of tax forms. Conventional mortgage loans require borrowers to present their tax returns, for instance, for verification purposes.
Mortgage applicants, on the other hand, can opt for a statement of loan.
Who should go for a Bank Statement Loan?
If you fall in any of the following categories, you can use your bank statement to apply for mortgage.
People with irregular income streams
- Freelancers or gig workers
- People with seasonal income
- Independent contractors
- Self-employed applicants
Types of Bank Statement Loans
Based on your situation and the lender, you can choose from different programs. Although most lenders ask for at least one year of statements, some may not require that many details. However, if you present 2 years of statements, you can negotiate better terms and rates.
Now, if you don’t have a valid business statement to present, there is another option: you can present a personal statement. For qualifying purpose, they can use a small ratio of your deposits.
At times, you may be required to present a P&L statement of your business to acquire a loan.
How can you get a Bank Statement Mortgage?
Typically, bank statement mortgages fall into the category of “non-qualified mortgages”. The reason is that they don’t meet the traditional lending standards. Not all lenders provide these mortgages. As a matter of fact, many credit unions and banks don’t offer these loans.
In this case, you should look for a lender that specializes in mortgage lending. Also, if you can’t qualify for conventional mortgage financing, you can get in touch with many lenders to find out if they can take statements for this service.
Don’t forget to ask about the requirements for business and personal statements. This will include questions about the statement period as well. Other important questions could be about interest rates and payment requirements.
What are the Mortgage Rates?
If you are a self-employed, seasonal income earner, consultant, freelancer, tax-preparer, or artist, you can apply for a statement loan to meet your needs.
A far as the rates of interest are concerned, down payment requirements are different based on the lender. Therefore, it’s better that you shop around to get the best deal.