Many people who are business owners or receive a 1099 may agree that their tax returns don't really show their true income. If you're self-employed and live in a high-cost state like California you tend to write off many expenses that a salaried or W2 employee is not able to do.
As a result, the income on your tax returns may not qualify for a traditional mortgage. The bank statement mortgage is a great alternative income solution offered by certain lenders to help self-employed borrowers qualify for a mortgage without tax returns.
You Have Three Bank Statement Loan Options
24 Month Bank Statement Mortgage
Borrower(s) will need to furnish 24 months of bank statements (personal or business) dating back from the last statement received. Example, if we are in the middle of April, then you'd provide 24 months back starting with your March statement.
12 Month Bank Statement Loan Program
Borrower(s) provide the lender their most recent 12 months of personal bank statements showing deposits from work with as low as 10-percent down. Business account statements spanning one year may be used as well to qualify.
3 Month Program
The 3 month program only allow personal bank statements to be used. Your middle credit score should be 700 or higher and maximum loan to value is 75 percent (a 25-percent down payment is required) or 70 LTV for a refinance. You must be self-employed and have owned real estate in your name within the last twenty-four months.
The interest rate will be higher than the 12-24 month product since you are providing less income documentation.
How to Qualify for the Bank Statement Mortgage Loan
Your employment status
This type of financing is available only for self-employed borrower(s), business owners, or for two borrowers where one or more of the borrowers is self-employed for the last two years. This is a great solution if you are paid commissions, receive a 1099 and don't want to provide tax returns or IRS tax transcripts. You simply need to show proof of income by providing 12 to 24 consecutive months of bank statements for the best terms.
Required Self Employment Documentation
A copy of your business license or "Articles of Incorporation" showing you have been self-employed in the most recent two years or have a licensed CPA or enrolled IRS tax preparer draft a letter confirming the same.
Your Income & Deposits
Income is calculated by averaging 100 percent of work-related deposits from your most recent 12 months of personal bank statements. If your statements show low deposits for two or three months, then a large deposit the following month, the underwriter may request an additional 12 months to confirm your monthly income normally fluctuates.
For business bank statements, and depending on the type of business as much as 90% of the job-related deposits can be used, not 100 percent.
The maximum "debt to income" (DTI) ratio is 50%.
How to get the best rate?
Borrowers with a DTI of 43 or less tend to receive the lowest rate available & pricing for bank statement loans. The savings can be substantial for applicants with low debt-to-income ratios versus those with a DTI over 43 or have crdit cores below 680.
Minimum Credit Scores Needed
With a 760 or higher middle FICO score you may qualify for as much as 90% financing based on the appraised value up to $2,000,000.
680 or higher middle FICO scores may qualify for as much as 85% financing depending on the appraised value.
** Credit scores below 620 are no longer acceptable
Refinance with cash back: 680+ credit scores and up to 75% financing;
Loan Amounts & Down Payments
- Minimum 10% down payment as of Sept. 24, 2021
- • 90% financing up to $2,000,000* best rates with 760 and above credit scores
- • 75% financing up to $3,000,000 loan on a $4 million home (75-percent of value) with a minimum 740 middle FICO score
- • Loans from $3.5 million to $5 million using bank statements for homes worth $9 million and above require a 35 percent down payment
- • Minimum loan amounts are $150,000
Minimum 3 months of the full mortgage payment (P.I.T.I.)
9-12 months is needed for the best interest rates, higher LTV's and loan amounts
If the loan amount is over $1 million, then 6 months is mandatory. If the loan is over $3 million, then 9-12 months may be necessary.
Acceptable Properties and Usage
Single family homes, townhomes, condos, condotel, duplex, triplex or fourplex all qualify on various programs. Property usage can be as a primary residence, second home, or rental property.
Which states is this available in?
We will have a loan officer help you if the property is located in Arizona, California, Colorado, Florida, Georgia, Idaho, Maryland, North Carolina, Oregon, South Carolina, Washington, Tennessee, and Texas.
Bank Statement Mortgage Lenders
There are many lenders who have started offering this type of loan for eligible self-employed borrowers. By applying online here you'll gain access to the best mortgage lenders for the bank statement loan. You may be surprised to learn that fees through a mortgage broker like Omni Fund are lower than the actual lender or a competiting mortgage broker you were considering. This is where it truly does pay to shop.
These alternative income verification loans are not difficult to obtain when using an experienced loan officer.
Additional product information
This loan type is offered on a 30 year fixed-rate or adjustable-rate mortgages with 5, 7, or 10 year fixed terms then it becomes adjustable. Rates start at 3.75% with 750 and above credit scores and 50 percent down. This is not a commitment to lend. All loans are subject to credit approval.
What is the Advantage?
No Tax Returns and No 4506-T forms to sign. With the bank statement loan program your income is not reduced by tax deductions.
We have programs that allow eligible deposits on bank statements from:
1. Paypal, Square, Amazon, AMEX and merchant accounts if this is related to and typical for your business.
2. W2 employee income from co-borrower is acceptable if there is a two-year history.
3. Retirement income (IRA, Annuities, SSA, Pensions).
Reasons why a bank statement lender may have turned you down
1.) Some lenders have business bank statement programs where they automatically reduce the income by 50% or more, so you may not qualify. Yes, that makes no sense because everybody doesn't have 50% expenses.
Fortunately, our loan officers have a program that reduces your business bank statements from just 10-30% of gross deposits. We understand that not all self-employed freelancers or commissioned agents have expenses that total 50 percent of their income every month.
2.) Some lenders won't allow you to use 2 or more bank acccounts. We have a program that does allow 2 or more accounts to be used for income as long as the income can be easily sourced.
3.) Some lenders won't allow very large deposits a few times a year with other months showing zero deposits. In this situation We have a different program that will work better for you.
Why Apply Here?
- You can compare quotes with another mortgage company
- You tend to get lower fees if the property is located in California, Colorado, Florida or Texas.
- $0 Processing Fees, $0 Application, $0 Administration Fees
- Experience and professionalism makes for a smooth transaction
**Last updated Sept. 24, 2021
Omni's main office is based in Southwest Riverside county so they can conveniently help borrowers in nearby Orange County, Los Angeles, San Diego, Ventura and throughout California.