Bank Statement Loans
Bank Statement loans give self-employed borrowers who don't receive a W-2 form the ability to qualify for a mortgage using bank statements, as opposed to pay stubs and/or tax returns.
How a Bank Statement Loan Helped Sarah, a Freelance Graphic Designer:
Let’s say Sarah is a freelance graphic designer who has been self-employed for the past five years. She doesn’t get regular paychecks, but her income flows in steadily from client projects throughout the year. Sarah wants to buy a home, but because her tax returns show low income due to business deductions, she struggles to qualify for a traditional mortgage.
Instead, Sarah applies for a bank statement mortgage. Here’s what she provides:
- 12 months of bank statements showing her average monthly income from clients.
- A credit score of 680, which qualifies her for a good interest rate.
- A down payment of 15% on a $400,000 home, meaning she needs $60,000 upfront.
- Proof of her freelance business, including a business license and contracts with her clients.
The lender uses Sarah’s bank statements to calculate her income and finds she qualifies for the loan. Thanks to the bank statement loan, Sarah is able to purchase her dream home without the hassle of traditional income documentation!