How Can I Get a Loan If I Am Self-Employed?

Just about everyone dreams of owning a home. If you're self-employed, qualifying for a mortgage loan can be challenging. Income is typically verified through W-2 forms and income information provided by employers. Self-employed borrowers don't have this type of income documentation. Bank statement loan programs, however, are an option for self-employed borrowers to verify their income.

Qualifying for a Bank Statement Loan

Many mortgage lenders offer bank statement programs, although required qualifications vary by lender. However, there are some standard requirements that you can use as guidelines as you research lenders.

Bank statement eligibility

1. Two-year minimum of self-employment. To be eligible for a bank statement loan, you must be self-employed for at least two years. The lender will require proof of your self-employment status. This can be done by providing legal documentation such as a business license. Your lender will be able to give you specific information they need to verify your status.
2. 12 to 24 months of bank statements. Generally, they will require 12 to 24 months of bank statements. These could be personal bank statements, business bank statements, or a combination of the two to show qualifying income. The average total income will be used to calculate what you make every month.
3. Good credit score. A good credit score is also essential when securing a bank statement loan. Your score will determine if you qualify, the interest rate you will pay, and the down payment amount if needed. The source of your down payment will also need to be explained to your lender, as you are not allowed to use gifted funds.

Your allowable debt-to-income ratio will vary depending on your income, credit, down payment, and other factors. Bank statement loans allow for higher debt-to-income ratios than conventional mortgage loans.

The lender determines the maximum loan size on a bank statement loan, which can be as high as one million dollars. The type of property that can be purchased can vary from a primary residence to a condo, vacation home, or secondary home.

You might have to supply a profit and loss statement and your bank statements to the lender. Check with your lender in advance, as a certified public accountant must prepare profit and loss statements.

Important information about bank statement loans

Other things you should know about bank statement loans:

• You can refinance your mortgage with a bank statement loan and have a cash-out option.
• Bank statement loans come in fixed-rate, adjustable-rate, and interest-only mortgages.
• Interest rates on bank statement loans tend to be higher than those on conventional mortgages. They are generally higher than those on standard mortgages. It's important to shop and look at various lenders to get the most favorable terms.

NASB offers fixed-rate bank statement loans for self-employed borrowers who want to realize their dream of home ownership. Apply for a bank statement loan or call us at 888-661-1983.