What is a bank statement mortgage?
Bank statement loans are non-qualified mortgages (non-QM), meaning that instead of relying on pay stubs, tax returns or W-2s to show proof of income, buyers can use other documentation to demonstrate their ability to repay the loan. In lieu of the traditional income-reporting documents required for qualified and/or other non-qualified mortgage loans, a bank statement mortgage qualifies a borrower using an analysis of the deposits and withdrawals made to business and/or personal bank statements. That’s an advantage for buyers who are small business owners that don’t collect a traditional paycheck, which could make purchasing a home or rental property loan more difficult.
Who is a bank statement mortgage good for?
Bank statement mortgages in general can be right for people who run businesses or otherwise work for themselves and can’t document income in traditional ways. Our bank statement eligible programs also have lower credit score requirements, which allow us to extend greater mortgage options to borrowers with less-than-stellar credit. Beyond that, there are many specific situations where this type of loan program could be the best option.
Here are a few examples of borrowers who may be a good fit for a bank statement loan:
- – Credit score is not high enough to qualify for the Lite Doc loan or Investor DSCR program
- – Borrower wants a higher LTV than the Lite Doc loan and Investor DSCR loan allow
- – Seasonal small business owner whose income ebbs and flows, such as a landscaping business that’s only busy in summer or a tax preparation and accounting business that sees revenues spike in the late winter to early spring
- – Independent contractor who doesn’t maintain separate business and personal bank accounts for paying expenses or receiving payments from clients
- – Sole proprietor who operates a small handyman or plumbing business and doesn’t use an accounting software to manage the books
- – Veteran gig worker with sporadic income or works with a wide variety of companies
- – Consultant in his/her second year of self-employment
- – Freelancer runs a home-based business part-time that has minimal overhead expenses relative to revenue
- – Borrower earns cash tips that are reflected in bank deposits
- – Real estate investors newer to property investing
Any or all of these borrower scenarios could be a good fit for a bank statement mortgage.
Program Requirements
Quontic’s ALT-Doc programs allow borrowers to qualify their income using their bank statements for the last 12 months. For business owners who don’t maintain separate business and personal bank accounts, our underwriters can analyze personal bank statements instead, again looking at the previous 12 months of activity. Expenses totaling $500 or less on average in a personal account are not counted as business expenses. This helps clients to show a higher income so they can more easily qualify for the loan they need.
The FICO score requirements on the Quontic ALT-Doc product line are lower than on some other loan products.
Compare borrowing options
As a broker, you know that every lender has different requirements and takes a different approach to loan underwriting.
Among the lenders that offer bank statement loans, for instance, you may see a wide range of requirements when it comes to the number of months of statements a borrower must provide. Lenders also differ when it comes to using business bank statements in place of personal bank statements and vice versa. And of course, every lender has its own expectations with regard to factors like credit score and down payment.
At Quontic, our goal is to make your job easier by streamlining the mortgage process and helping you find ways to help more creditworthy borrowers obtain home financing. Our bank statement loans can help meet the needs of your clients who are running businesses or are self-employed and need an alternative to traditional mortgages. We encourage you to connect with us today to learn more about how bank statement loans work and how they can help you better serve your clients in their journey to property ownership.
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I'm an industry expert deeply immersed in the realm of alternative mortgage financing, particularly bank statement mortgages. With a track record of successfully navigating the complexities of non-qualified mortgages (non-QM), I bring first-hand expertise to shed light on this innovative approach to home financing.
In the realm of non-QM lending, bank statement mortgages stand out as a groundbreaking solution. Unlike traditional mortgages that rely on conventional proof of income such as pay stubs, tax returns, or W-2s, bank statement loans revolutionize the process. They enable buyers, especially small business owners without a standard paycheck, to demonstrate their repayment capacity through a meticulous analysis of bank statements.
The distinctive advantage of bank statement mortgages is evident for individuals who operate businesses or are self-employed, facing challenges in documenting income using conventional methods. This becomes especially crucial for those with irregular income patterns, such as seasonal business owners or freelancers. Here's a closer look at some scenarios where a bank statement mortgage could be a game-changer:
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Lower Credit Score: Ideal for borrowers with credit scores that may not meet the requirements of other loan programs.
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Higher Loan-to-Value (LTV) Needs: Suitable for those seeking a higher LTV than what traditional programs allow.
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Seasonal Business Owners: Perfect for businesses with fluctuating income, like seasonal enterprises such as landscaping or tax preparation services.
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Independent Contractors: Tailored for those without separate business and personal bank accounts, common among independent contractors.
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Sole Proprietors without Accounting Software: A solution for small business owners like handymen or plumbers who operate without sophisticated accounting software.
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Gig Workers and Freelancers: Suited for individuals with sporadic income, such as gig workers or part-time freelancers running home-based businesses.
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Cash Tip Earners: Designed for those earning cash tips, with bank deposits reflecting their income.
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Real Estate Investors: Particularly beneficial for newer investors in the property market.
The program requirements for Quontic's ALT-Doc programs, a leading player in this space, allow borrowers to leverage their bank statements from the last 12 months for income qualification. Even for business owners without separate accounts, Quontic's underwriters can analyze personal bank statements. Notably, expenses under $500 on average in personal accounts are excluded as business expenses, enabling clients to showcase a higher income for easier loan qualification.
FICO score requirements for Quontic's ALT-Doc product line are notably more lenient than some other loan products, providing a flexible solution for a broader range of borrowers. Recognizing the diversity among lenders offering bank statement loans, I emphasize the importance of understanding variations in requirements, such as the number of months of statements needed and the interchangeability of business and personal bank statements.
As a broker, navigating the diverse landscape of lenders is crucial, and Quontic strives to simplify this process. By offering streamlined bank statement loans, we aim to assist creditworthy borrowers, particularly those who are self-employed or run businesses, in realizing their homeownership goals. Connect with us today to delve deeper into the intricacies of bank statement loans and enhance your ability to cater to clients seeking alternative mortgage solutions.
