Non QM: Bank Statement Loans

You may have found your dream home, but it might remain a dream without approved financing. Bank statement loans, as the name implies, use bank statements to determine your income. They are a non-qualified mortgage product that offers financing to homebuyers who may not be eligible for a traditional mortgage product. If you are a freelancer, self-employed worker, small business owner, real estate investor or Real Estate Agent, you may fall into that category. That’s because you would be unable to provide the standard forms of income and employment verification.
Let’s dive into what’s needed for traditional mortgages and why bank statement loans provide a solution for buyers who may feel left behind by those loan products.

 

What is a Qualified Mortgage Loan?

A qualified mortgage loan is a loan product that meets the guidelines set out by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The federal legislation was passed in 2008 to protect lenders and borrowers by restricting who could access mortgage financing. These guidelines established a minimum debt-to-income ratio, term limit maximums and a ban on negative amortization (where your loan principal increases over time even though you’re making payments).

Qualified mortgage loan products, or QM loans, that meet these restrictions include:

freelance employee

What Are Non-QM Loans?

Non-QM loans are financial products that do not meet certain criteria, including:

  • Points and fees less than or equal to 3% for loan amounts of $100,000 or more
  • Exclude negative amortization, interest-only payments or a balloon payment
  • Only offer loan terms of 30 years or less
  • Feature a debt-to-income ratio (DTI) of 43% or less

That last point is vital because QM loans require lenders to verify your income by providing your tax returns, W-2s, pay stubs or employer verification forms. By forgoing one or more of these requirements with a non-QM loan, lenders are able to fund homebuyers who have unique financial situations.

bank statement

Who Can Benefit From a Bank Statement Loan?

Bank statement loans are a non-QM product that bridges that gap for borrowers because they allow lenders to use your bank statements to verify your income rather than tax returns or W2s. This can be extremely helpful in many situations.

Mortgage loans for self-employed: A self-employed homebuyer might earn $7,000 a month. But after write-offs, their tax forms may only document an income of only $5,000 a month or less. Bank statements show a fuller picture.

Business bank statement loans: Provides loan approvals for businesses that may not be well-established with approval criteria that are far more flexible than traditional loans.

Funding for freelancers: Rather than W2s or 1099s, lenders will look at 12 to 24 months’ worth of personal or business statements to determine if your income meets their requirements.

If you earn seasonal income, are self-employed, or work as a consultant or artist, you have options for buying your dream home. Bank statement loans offer a solution for professionals with irregular income streams.

To get started, contact us today!

Related Articles

The supply of houses on the market has fallen from an average of 1.6 million units monthly in 2018 and 2019 to just over 1 million in 2021 – and the monthly figures for this year are lower still. Fewer homes available and high demand means home buyers must leverage…
Read More of the post Benefits of Pre-Approval: Get the Upper Hand

Your first time buying a home will be exciting, offering a window into the setting of your future. At Homebridge, we delight in the opportunity to help first-time homebuyers because we are reminded of what home truly means and the positive difference it can make in people’s lives. Accordingly, we…
Read More of the post 4 Stops Along the Road to First Time Homebuying

In honor of Earth Day, consider these 10 ideas for implementing energy-efficient improvements throughout your home. Not only will these strategies benefit the environment by reducing your carbon footprint, but they will help you save money by improving your energy bill as well. No matter the time of year, improving…
Read More of the post 10 Ways to Make Your Home Energy Efficient

USING GIFT FUNDS TO BUY A HOME For many homebuyers, gift funds are a needed boost to help them cover the necessary down payment on their dream home. Although it’s common practice to receive these financial gifts from friends and family, there are still many guidelines you should consider before…
Read More of the post USING GIFT FUNDS TO BUY A HOME