You got where you are by thinking outside of the box. Your path to success has been anything but conventional. Why should your financing be?
Successful self-employed individuals with unconventional income structures need flexible financing solutions from lenders who understand their unique situations and needs—such as the bank statement mortgage from MBANC.
What Is a Bank Statement Mortgage?
A bank statement mortgage or a bank statement loan, also known as an alternative income mortgage, self-employed mortgage or non-traditional income mortgage, is a type of non-QM loan that can be used to purchase or refinance a property.
This product is specifically designed for self-employed borrowers who do not have traditional income documentation, such as W-2s or tax returns, can not evidence consistent income or do not reflect their actual income on tax returns due to tax deductions.
Instead of traditional pay stubs or W-2 forms, a lender uses the deposits evidenced in the bank statements as a primary source of income verification. This can be a more accurate reflection of the borrower’s income than traditional documentation, especially for those who have variable income or multiple streams of income.
If you want to know how our self-employed clients used bank statement mortgages from Mbanc to leverage equity in their properties, read the following success stories: Eran in California, Paul in Colorado or Craig in Florida.
Bank Statement Mortgage Vs. Traditional Mortgage
Traditional mortgages, or conventional loans, are more common and work well for borrowers who can evidence consistent income and provide such documents as pay stubs, W-2 forms and tax returns. Traditional mortgages normally have lower interest rates than non-QM loans, such as a bank statement mortgage, due to the difference in risk that the lender accepts.
Non-QM loans, such as a bank statement mortgage, are more flexible and are better suited to self-employed borrowers who do not have traditional income documentation, such as W-2s or tax returns, can not evidence consistent income or do not reflect their actual income on tax returns due to tax deductions. It’s important to note that if you are a 1099 entrepreneur–for example, a freelancer who gets a 1099 for their services—a 1099 mortgage may be a more suitable mortgage product. For a real estate investor, a DSCR mortgage might work better. Contact us today, online or over the phone, to speak with one of our experienced mortgage experts, who will understand your unique scenario and guide you through available options.
Bank Statement Mortgage Considerations
Simplified income verification is not the only benefit of the bank statement mortgages. Did you know that with the bank statement mortgage you can access larger loan amounts than with a traditional mortgage? With Mbanc, you can purchase or refinance a property with a bank statement loan up to $4 million.
Loan amount and interest rate are not the only considerations. The average time to close is another important factor. Simplified income verification means that the overall process of getting a bank statement mortgage is more streamlined than with a traditional mortgage. Still, ask your lender about their average time to close. For example, Mbanc’s is just 17 days.
To qualify for a bank statement mortgage, you typically need to meet the following criteria and provide relevant documents to evidence:
- Minimum income. Show a consistent minimum income level specified by the lender.
- Financial stability. Be able to evidence a continuous record of employment and/ or a pattern of deposits in bank statements.
- Creditworthiness. A good credit history.
- Down payment.
To give you an idea, at Mbanc, we require a minimum 660 FICO score (the higher your credit score—the better interest rate and terms a lender can offer), a self-employment history of at least two years, 12 or 24 months of bank deposits, a down payment of at least 15% and a debt-to-income (DTI) ratio of up to 50% with 6 to 12 months reserves.
We also offer a 10-year interest only loan option on 30- and 40-year term mortgages.
How to Find the Right Lender
Not all mortgage lenders offer non-QM loans, such as bank statement mortgages. It is important to shop around and do your research to make sure you find the right lender that meets your requirements.
Different lenders have different mortgage terms, rates, fees, approval processes, time to close and offer different amounts of equity. They also vary in the level of customer service which is why we recommend reading customer reviews.
There are two types of mortgage lenders: direct lenders (mortgage banks) and mortgage brokers. If you are considering a broker, you need to understand how they choose a lender, if they are incentivized to do so and if they work with non-QM lenders. It is also important to remember that a broker is an intermediate, so they may not always be flexible or able to influence the lender’s decision.
Key criteria to look for in a non-QM lender when applying for a bank statement mortgage are:
- Expertise in self-employed mortgages. Choose a lender that specializes in lending to self-employed borrowers like you and understands their unique financial needs. They need to have the experience and expertise to help you qualify for a mortgage.
- Average time to close. Speed is of essence in the real estate market. Make sure you understand your lender’s average time to close. For example, the average time to close with Mbanc is just 17 days. We are a direct non-QM lender and a mortgage bank, so we handle all processing and underwriting in-house.
- Flexibility. Self-employed borrowers have unique income structures and dynamic financial profiles that often require guideline exceptions to qualify. Choose a direct lender like Mbanc, which handles the approval process in-house and can offer more flexibility if you need an exception.
- Customer Service. Read reviews and testimonials for a lender of your choice and understand their strengths and weaknesses, such as the average deal closing time and how flexible they can be when it comes to exceptions.
Why Mbanc?
We have been a premier consumer direct lender since 2005. Our founders are leaders with over 100 years of experience combined and closed deals in the billions of dollars in total. Our proprietary process delivers proven results.
Getting a mortgage with Mbanc is different compared to other lenders. At the outset, you are working with knowledgeable, understanding, expert loan officers to find the best solutions for your mortgage needs. Excellent client reviews on Google are a testament to our customer service.
We let you know upfront exactly what paperwork we need so you don’t waste your precious time. Our average time to close is just 17 days. We are completely transparent regarding the terms of your loan. Get in touch with us today and our experienced mortgage officers will guide you through the options available to you.