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For granting home loans, mortgage providers verify the income source of the borrower. Typically, verification is done based on the W2 tax form. However, this can pose a problem if you work as an independent professional, such as a freelancer. This is because freelancers, owners, gig workers and contractors do not have tax forms to submit. This is where bank statement mortgages come into play.
Here is how it works. All you have to do is prove your source of income by producing your statements for a year or two. Read on to find out more.
What is Bank Statement Mortgage?
With a bank statement mortgage, the lender can verify your income with the help of a bank statement instead of a tax form. Traditional mortgage loans require borrowers to present their tax returns, for example, for verification purposes.
Mortgage applicants, on the other hand, can opt for loan details.
Who Should Go For Bank Statement Loan?
If you fall in any of the following categories, you can use your bank details to apply for a mortgage.
people with irregular income streams
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freelancer or gig worker
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seasonal income earners
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independent contractors
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self employed applicant
Bank Statement Loan Types
Depending on your situation and the lender, you can choose from a variety of programs. While most lenders ask for at least one year’s worth of details, some may not require as many details. However, you can negotiate better terms and rates if you submit 2 years’ details.
Now, if you do not have a valid business description to submit, there is another option: you can submit a personal description. For qualifying purposes, they may use a small proportion of your deposit amount.
Sometimes, you may need to submit the P&L statement of your business to avail the loan.
How can you get the bank statement mortgage?
Generally, bank statement mortgages fall into the category of “non-qualifying mortgages.” This is because they do not meet traditional lending standards. Not all lenders offer these mortgages. In fact, many credit unions and banks do not offer these loans.
In this case, you should look for a lender that specializes in mortgage lending. Also, if you can’t qualify for traditional mortgage financing, you can contact several lenders to find out if they can take statements for this service.
Be sure to ask about the requirements for business and personal statements. It will also include questions about statement duration. Other important questions may be about interest rates and repayment requirements.
What are mortgage rates?
If you are a self-employed, seasonal income earner, consultant, freelancer, tax preparer, or artist, you can apply for a statement loan to meet your needs.
As far as interest rates are concerned, down payment requirements differ depending on the lender. Hence, it is better that you shop around to get the best deal.
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