Bank Statement Loans: Complete Guide for Self-Employed Borrowers
Bank Statement Loans: The Self-Employed Homebuyer's Secret Weapon
For self-employed professionals, freelancers, and small business owners in Evansville, standard mortgage requirements can feel like a brick wall. You make great money, but your tax returns—designed to minimize liability—might not reflect your true income.
Enter the Bank Statement Information Loan.
This alternative mortgage product allows you to prove your ability to repay using your actual bank deposits rather than tax returns. Here is everything you need to know about qualifying for a home in 2024 without a W-2.
What is a Bank Statement Loan?
A bank statement loan is a "non-QM" (Non-Qualified Mortgage) loan that uses 12 to 24 months of personal or business bank statements to calculate your income.
Who is this for?
- Business Owners: From contractors to shop owners.
- Gig Workers & Freelancers: Uber drivers, designers, and consultants.
- Realtors & Investors: Professionals with complex income streams.
If your net income on your tax return is significantly lower than your gross revenue due to write-offs, this loan is designed for you.
Key Requirements (2024-2025)
While requirements vary by lender, here are the standards you should prepare for:
1. Credit Score
- Minimum: Most lenders require a score of 620.
- Ideal: A score of 700+ will get you the best interest rates and lowest down payment.
2. Down Payment
Expect to put down more than a conventional loan.
- 10% Down: Available for borrowers with excellent credit (700+).
- 20% Down: The standard requirement for most borrowers.
- Investment Properties: Often require 20-25% down.
3. Documentation
You will need to provide:
- 12 to 24 Months of bank statements (Personal or Business).
- Business License or proof of existence (e.g., website, Secretary of State listing) for at least 2 years.
- No Tax Returns are required.
The Pros and Cons
Pros:
- High Loan Limits: You can often borrow up to $3 million, perfect for luxury homes in Newburgh or McCutchanville.
- Maximize Write-Offs: You don't have to choose between saving on taxes and buying a home.
- Flexible Income: Uses an average of your monthly deposits.
Cons:
- Higher Rates: Interest rates are typically 0.5% to 1% higher than conventional loans.
- Larger Down Payment: The 3.5% down payment options are generally not available.
How Income is Calculated
Lenders look at your total eligible deposits over the last 12-24 months.
- Personal Statements: 100% of deposits are usually counted as income.
- Business Statements: Lenders apply an "expense factor" (typically 50%) to your deposits to estimate your net income. Tip: A CPA letter stating your actual expense ratio is lower can often boost your qualifying income.
Getting Started in Evansville
Ready to stop renting and start owning?
- Organize Your Statements: Download PDFs of your last 24 months of bank statements.
- Check Your Credit: Ensure your score is above 620.
- Find a Specialist: Not all lenders offer these loans. Ask a local real estate agent for a referral to a mortgage broker who specializes in Non-QM or Self-Employed mortgages.
Your business success shouldn't disqualify you from homeownership. With a bank statement loan, your revenue tells the real story.
