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? Bank statement mortgages are a mortgage solution that leverages alternative documentation, making it easier for self-employed borrowers to qualify for home financing.

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, which uses alternative documentation as a key feature to simplify the qualification process.

What Is a Bank Statement Mortgage? 

A bank statement mortgage or a bank statement loan (also known as statement loans), 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, cannot evidence consistent income, or do not reflect their actual income on tax returns due to tax deductions. Many borrowers are unable to qualify for a traditional home loan because their tax return does not accurately show their true income.

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. Business bank statements and business accounts can be used to verify income for self-employed applicants. Bank statement loans work by analyzing deposits over 12 or 24 months, rather than relying on traditional financial statements. 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.

Bank statement loans can be used to purchase or refinance a primary residence, investment property, or second home, and are not limited to primary residences.

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 CaliforniaPaul in Colorado or Craig in Florida.

These non qualified mortgage loan programs provide flexible home loan options for self-employed individuals and real estate investors.

Bank Statement Mortgage Vs. Traditional Mortgage

Traditional mortgages, or conventional loans, also known as traditional loans or traditional mortgage loans, are typically backed by Fannie Mae or Freddie Mac. These 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 are considered qualified mortgages under CFPB guidelines, offering borrower protections and stricter credit requirements, while bank statement loans are classified as non qualified mortgages. 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, cannot evidence consistent income, or do not reflect their actual income on tax returns due to tax deductions. These non qualified mortgages serve as an alternative to conventional financing and are not backed by Fannie Mae or Freddie Mac, making them distinct from traditional mortgage loan programs. 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.

Lenders analyze cash flow from your bank statements to assess your ability to repay and determine payment requirements. This approach allows for more flexible qualification, especially for self-employed borrowers or those with non-traditional income.

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:

1. Minimum income. Show a consistent minimum income level specified by the lender. Steady income is important for qualification.

2. Financial stability. Be able to evidence a continuous record of employment and/or a pattern of deposits in bank statements, which helps demonstrate positive cash flow.

3. Creditworthiness. A good credit history, meeting the minimum credit score required by the lender. Credit scores are reviewed, and credit events or high credit card balances can impact eligibility and loan terms.

4. Down payment. Down payment requirements may include higher down payments or a large down payment depending on risk factors. Some non-QM loans require larger down payments due to flexible qualifying criteria.

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.

When considering loan amounts, lenders also evaluate the maximum loan limits and how your loan balance fits within underwriting guidelines.

If you have significant assets or liquid assets, these can help meet reserve requirements or qualify you for asset based loans, which are ideal for borrowers with high net worth.

For real estate investors, DSCR loans are available, and qualification is based on the debt service coverage ratio, which measures the property’s income against its debt obligations.

We also offer a 10-year interest only loan option on 30- and 40-year term mortgages. Loan terms can be customized for different borrower profiles, including extended durations and flexible qualifying criteria.

During the approval process, your history of mortgage payments is reviewed, as past mortgage payments can influence your eligibility and the terms offered.

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. Working with experienced loan officers can help non QM borrowers navigate the mortgage process, ensuring you receive expert guidance from application to closing.

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:

1. 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.

2. 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.

3. 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.

4. Specialized mortgage solutions and knowledgeable loan officers. Look for non qm mortgage lenders who provide tailored mortgage solutions for non QM borrowers and have experienced loan officers to guide you through the mortgage process.

5. 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. Experienced loan officers add value by providing personalized mortgage solutions and expert support throughout the process.

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.