Bank Statement Loan

Interest rates for bank statement loans tend to be higher than those for conventional loans. These loans are considered higher risk since they don’t require traditional income verification. Rates depend on factors such as your credit score, down payment, and the loan amount.

Like a traditional mortgage loan, you should maintain a good credit score (700 and up) to be approved for a bank statement loan.

With bank statement loans, the lender uses bank statements to analyze a borrower's income instead of using standard documentation. Lenders that offer bank statement loan programs will look at a borrower's bank over a 12 to 24 month time period to determine the borrower's net income, which is the amount of money earned after the borrower has paid taxes and business-related expenses.  Here’s a blog that helps explain this more.

NASB requires at least two years of self-employment, 12 months of consecutive bank statements from the same account, up to 90% max LTV, and the borrower must have a 50% maximum debt-to-income ratio. The maximum loan amount is $1,250,000.

Self-employed individuals or business owners who have at least 12-24 months of bank statements to show consistent deposits. Individuals with irregular income (like contractors, freelancers, or small business owners) cannot prove consistent income via tax returns or W-2s. People with good credit scores, though specific requirements may vary by lender.

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.

Income verification: Lenders review your bank statements (typically the last 12 or 24 months) to determine the average monthly deposits. If you're self-employed, lenders may also look at the cash flow in your business bank account and apply specific adjustments to calculate your income.

Credit score: Most lenders require a minimum credit score of around 700.

Down payment: Bank statement loans require a down payment of at least 10% with required mortgage insurance. 

Bank statements: Lenders typically require 12 or 24 months of personal or business bank statements to verify income and cash flow.

Identification documents: Lenders will ask for government-issued ID, proof of address, and sometimes Social Security information.

Credit report: A credit report will be checked to evaluate your creditworthiness.

Asset statements: Sometimes, you may need to provide additional statements or documents showing your savings or investments.

Lenders typically accept personal bank statements (if the borrower is self-employed or a freelancer) and business bank statements (if the borrower is a business owner). The statements should clearly show regular deposits that are consistent and sufficient to cover your monthly loan payment.

Lenders usually calculate income by averaging the deposits over the 12 or 24 months of bank statements. Some lenders may consider only business deposits if you are a business owner, while others may consider personal and business accounts. Adjustments can be made to account for non-recurring deposits or withdrawals (e.g., large lump-sum deposits that may not reflect your regular income).

The loan amount you can qualify for will depend on the average income calculated from your bank statements and your debt-to-income (DTI) ratio. Lenders typically set limits based on income and other factors, such as the type of property (primary residence, second home, investment property).

Bank statement loans often require larger down payments (typically 10%- 20% or more). The larger down payment helps offset the additional risk lenders take on since income verification is less traditional.

Primary residences: You can use a bank statement loan to buy a home you plan to live in.

Second homes: A bank statement loan may be used to purchase a vacation or second home.

Investment properties: Some lenders also allow bank statement loans to finance investment properties that generate rental income.

Flexible documentation: Bank statement loans are a good option for self-employed individuals or people with unconventional incomes who can’t provide traditional proof of income.

Fewer requirements: Compared to conventional loans, there are fewer requirements, such as not needing tax returns or W-2s.

Easier approval for non-traditional income: Those with non-salaried income sources (like contract or freelance work) may find qualifying easier.

Yes, bank statement loans can be used to refinance existing properties, whether a cash-out or a rate-and-term refinance.

The same requirements apply regarding bank statements, credit scores, and down payment.