Posted on August 16, 2023

Bank statement loans are a type of loan program that allows individuals, including self-employed individuals and business owners, to use their bank statements as a way to demonstrate their income and qualify for a loan. These loans are often used as an alternative to traditional income verification methods, such as providing tax returns or pay stubs.

Here's how bank statement loans generally work:

1. **Income Verification**: Instead of providing traditional income documentation, borrowers provide their bank statements (usually the most recent 12 to 24 months) as evidence of their income and cash flow.

2. **Calculation of Income**: Lenders will review the deposits and transactions on the bank statements to calculate an average monthly income. This average income is then used to determine the borrower's eligibility for the loan.

3. **Eligibility Criteria**: Borrowers need to meet certain criteria, such as having a minimum credit score, a consistent history of deposits, and a low debt-to-income ratio. The specific requirements can vary from lender to lender.

4. **Types of Loans**: Bank statement loans can be used for various purposes, including purchasing a home, refinancing, or obtaining a business loan.

5. **Interest Rates and Terms**: The interest rates and terms for bank statement loans can vary based on the borrower's credit profile, the loan amount, and the lender's policies. Generally, these loans might have slightly higher interest rates compared to traditional loans due to the increased risk for the lender.

6. **Documentation**: While these loans require less traditional income documentation, borrowers might still need to provide other documentation, such as identification, proof of assets, and business ownership documents.

Bank statement loans can be beneficial for individuals with non-traditional income sources or those who have difficulty providing standard income documentation. However, it's important to carefully review the terms, interest rates, and fees associated with these loans before proceeding. Working with a qualified mortgage broker or lender who specializes in bank statement loans can help you navigate the process and find the best loan option for your situation.

With our dedication to providing exceptional customer service, we strive to build long-lasting relationships with our clients and help them achieve their financing goals. To learn more about how we can help your small business succeed, contact us today at (832) 282-8974 or email [email protected].