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Bank Statement Mortgages Ready to Serve the Under-Banked Self-Employed Borrower

September 30, 2020
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by Christian Perez
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Sept. 20, 2020
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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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