Bank Statement Loans
What Are Bank Statement Loans?
Bank statement loans are a type of non-qualified mortgage (non-QM) designed mainly for self-employed borrowers. Instead of tax returns or W-2s, lenders use 12 to 24 months of personal or business bank statements to evaluate income and cash flow.
Key Benefits
- No W-2s or tax returns are required, which makes these loans a strong option for freelancers, gig workers, and small business owners.
- Qualification is based on real cash flow rather than adjusted gross income or employment history.
- Loan amounts can be higher, often up to $2–3 million for a single property.
- Borrowers can use LLCs for added flexibility and asset protection.
- Applies to different property types including primary residences, second homes, and investment properties.
How Bank Statement Loans Work
Common Drawbacks
- Interest rates are usually 1–2% higher than conventional mortgages.
- Applications go through manual underwriting, meaning deposits and documentation are reviewed in detail.
- Lenders often require larger down payments, typically 10–20% or more.
Eligibility Requirements
- At least two years of self-employment history.
- Between 12 and 24 months of bank statements, depending on the lender.
- A credit score of 620 or higher, with better rates available above 700.
- A minimum 10% down payment, with 20% or more leading to stronger terms.
- A CPA letter may help reduce expense factors and boost qualifying income.