Bank statement loans are a type of loan that allows you to get a mortgage without the documents that most loans need to prove your income. We use bank statements to qualify you for a mortgage rather than your tax returns, which are typically required for self-employed borrowers. If your tax returns show a loss, most lenders would turn you away. This is the case even with a profitable Profit & Loss. Lenders can only use the income claimed on your tax returns for qualifying. A bank statement loan bypasses the need for tax returns and instead focuses on the money you bring in monthly to qualify you for a mortgage. It works just like any other loan – you apply for and qualify for the loan and get the funding to buy a home, making your mortgage payments monthly.
You may want to use a bank statement loan if you don't have a steady cash flow. They are also good if you can’t get proof of income from an employer. People who might use a bank statement loan could be:
No tax returns, W-2s You can get mortgage financing without using your tax returns and/or you've been denied by your bank or credit union.
You can continue to claim your business write-offs without losing your mortgage eligibility.
You don’t need perfect credit
You can buy a home with just 10% down
A higher debt-to-income ratio may be okay
Often have high loan limits
Often can be used on primary residences, second homes, and investment purchases
May have higher interest rates
May need a larger down payment
Not offered by all lenders