24 & 12 Month Bank Statement Mortgage with Alternative Options
A bank statement mortgage allows self employed borrowers to refinance or purchase a home without calculating income based off of tax returns. For self employed borrowers, taxable income makes it difficult to qualify for a traditional loan. When a self employed borrower cannot qualify for traditional financing, a bank statement loan is a solution to affordable loans with easy qualifications and flexible down payments.
Calculating Self Employed Income for a Bank Statement Mortgage
For a 24 and 12 month bank statement home loan, qualifying income is calculated by total deposits minus any disallowed deposits divided by the amount of months. Every case scenario is unique and starts with calculating self employed income.
Calculating total qualifying monthly income for a bank statement loan is done by an underwriter filling out a bank statement income calculator documenting the statement end dates.
Calculating Eligible Deposits
The following factors are determined when averaging the total eligible deposits:
- Statement end dates.
- Total deposits.
- Unsupported large/atypical deposits.
- Non-self employed incomes, such as alimony, child support, SSI, employment…
- Excluded deposits, such as credit returns, account transfers, credit card cash advances…
An underwriter will take all factors into consideration to determine total eligible deposits for the total qualifying monthly income for each account. Eligible deposits often vary by lender.
Example – 12 Month Bank Statement Loan
For 12 month bank statement loans, consecutive personal statements from checking or savings must be used to determine the qualifying income and be consistent for the borrower’s typical line of work. For a 24 or 12 month bank statement loan, acceptable deposits are averaged.
Bank Statement Home Loan – Asset Depletion
Asset conversion can be used for qualifying income. Qualified assets for asset depletion can be:
- Mutual funds.
- Vested amount of retirement account.
- Bank accounts.
For qualified assets, there is a conversion of each type of asset to calculate qualified income.
Bank Statement Mortgage Option with a Recent Derogatory Event
Purchase, refinance, and cash out options available for recent bankruptcies and foreclosures. Key qualifying factors are, but not limited to:
- Recent mortgage or rental history events depend on the seasoning of the event.
- Foreclosure, short sale, deed in lieu, or modification seasoning is not required.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy does not require any seasoning when discharged or dismissed. A Chapter 13 bankruptcy remaining open must meet the following requirements:
- A repayment period of 12 months must be elapsed.
- All bankruptcy payment plans must be made on time.
- The borrower must receive written permission from the bankruptcy court to enter into the transaction.
Minimum Credit Score with a Recent Event
- 620 minimum FICO score when using alternative docs for the 12 month bank statement loan.
- 580 FICO credit score for 24 month bank statements.
- Down to 500 FICO credit score with traditional income.
Minimum Documentation for Self Employed
For self employed borrowers that are eligible for a business and/or personal bank statement loan a borrower must be, but not limited to:
- Self employed for at least 2 years.
- Business must exist for 2 years.
- Standard trade lines.
- Parties on each bank account must be included on the loan, which statements must support stable and predictable deposits.
Other Mortgage Options with No Income
There are loan programs for investment properties that allow a property to close in an LLC or Corporation without calculating personal debt-to-income. This all depends on the property condition. The programs are:
- Debt-service coverage (DSR loans) ratio loans.
- No-ratio loans.
- Fix and flip, bridge, and construction loans.
Debt-Service Coverage Loan
The debt-service coverage ratio (DSCR) loan allows you to finance investment properties based on the cash flow of the property. This is calculated by dividing the net operating income divided by the total mortgage payment. There is also a mortgage option that allows a property to not take debt-service coverage as a qualifying factor. Properties must meet conventional appraisal standards, but there are mortgage options when a property does not.
Fix and Flip, Bridge, and Construction Loans
This loan program is based on liquidity. You can leverage your money to acquire properties that do not meet conventional appraisal standards. These loan programs are short term interest only loans that allows investors to sell or refinance into a permanent loan.