Bank Statement Programs: Solutions for Business Owners
Did you know there are as many as 27 million people in this country who are self-employed or relying on gigs and side-hustles to compound their income? This new generation of workers and entrepreneurs can include traditional professions like doctors, lawyers and shopkeepers, as well as consultants, investors or freelancers. They’re all creative and motivated to achieve financial success, even if it doesn’t look the same as it did in days gone by.
Therefore, when someone owns their own business they probably don’t have access to W2s, pay stubs or income statements that are typically required to qualify for home ownership or refinancing a mortgage. Fortunately, there are those in lending industry – like EnTrust Funding (ETF) – who have also proven to be creative and motivated to help homeowners and home buyers take the necessary steps through bank statement loans.
Also referred to as self-employment mortgages or alternate documentation loans, these programs are a more flexible method of borrowing without the conventional proof of income and assets. By making calculations on personal and business bank statements along with other information provided, a lender can determine eligibility for prospective borrowers. So, what are some of the requirements and highlights of bank statement loans?
What you’ll need to have:
• 2+ years of self-employment
• 12-24 months of consecutive personal or business bank statements
• Must own at least 25% of the company for personal accounts; 50% for business accounts
• FICO score as low as 500 for an 80% loan-to-value ratio (LTV)
• Maximum 90% LTV with no mortgage insurance
• Verification of liquid assets such as 401k or mutual funds
• Possible letter from accountant or tax preparer validating business status and expenses
• 24 months seasoning required for credit events such as foreclosure or bankruptcy
What you’ll want to know:
• Loans possible up to $3 million
• Interest only options available
• Can be used for primary residence, second home or investment property
• 30-year, 5/1, and 7/1 options available
• 30-year loan priced same as ARMs (adjustable rate mortgage)
• Can combine with a fully documented borrower (i.e., traditionally employed partner)
• Qualify with 50% expense ratio with no additional documentation
By using bank statements and meeting the above criteria, business owners not only have more purchase options but also may benefit from a rate and term refinance or cash-out refinance as well.
Are you a self-employed borrower who is unable to qualify for a loan using traditional methods? Don’t assume your lack of tax forms documenting consistent income takes you out of the equation. Perhaps you’re looking to refinance on a mortgage that was obtained when you were employed elsewhere, but you’re now your own boss.
Requirements and available programs may vary from lender to lender, so let ETF explore your options today. Our bank statement program could be the perfect solution for business owners who have the clear ability to repay, but without the traditional hoops and red tape.