This loan type has grown significantly in popularity as more Americans work for themselves. According to recent data, over 16 million people in the U.S. are self-employed, and many find traditional lending requirements too restrictive. Self-employed mortgages provide a practical path to homeownership without penalizing entrepreneurial success.

As non-traditional mortgage loans, bank statement loans are structured to accommodate unique financial situations that don’t fit the conventional mold. The main benefits of these loans include:

• No tax return requirements, which means you don’t have to explain away legitimate business deductions.
• More flexibility in income documentation that reflects your actual income rather than adjusted gross income.
• Faster approval timelines since there’s less documentation to review and verify.
• Versatile property types, including primary residences, second homes, and investment properties.

Whether you need financing for a primary residence or investment property loans for rental properties, bank statement loans provide the flexibility to qualify.

For more context on how these loans work in real scenarios, check out these bank statement loan examples.

Bank Statement Loan Document Checklist

Use this bank statement loan checklist to see exactly what documentation you’ll need when applying for this type of loan:

Personal Identification Documents

These documents are required to qualify for a mortgage of any type. Lenders need to confirm who you are and that you legally reside where you claim. Here are the identification documents you’ll need for a bank statement loan:

• Government-issued photo ID: Your driver’s license or passport verifies your identity and must be current and unexpired.
• Social Security Number or ITIN: You’ll need to provide your SSN or Individual Taxpayer Identification Number for credit checks and verification.
• Proof of residency: Recent utility bills, lease agreements, or other official documents prove to lenders that you live where you say you do.

Bank Statements

Bank statements show your income patterns and financial stability over an extended period. Here are the bank statement loan documents you’ll need to share with lenders:

• 12 to 24 months of personal or business bank statements: Most lenders require at least one year, though 24 months strengthens your application and may improve your terms.

All statements should come from the same bank account or accounts to show reliable income patterns.

Provide every page of each statement, including pages that appear blank or show minimal activity. Missing pages can delay your approval or raise red flags. To streamline the bank statement loan application process, apply with Griffin Funding — our software allows you to skip manually uploading your bank statements, and instead automatically sync 12-24 months’ worth of bank statements with the click of a button.

Make sure your statements clearly show regular deposits that demonstrate consistent income. Lenders calculate your qualifying income by averaging your total deposits and applying an expense ratio, so it’s important to have accurate records.

Business Documentation

If you’re self-employed, you’ll need to prove your business is legitimate and has been operating for a sufficient length of time. Here are the business documents you’ll need:

• Proof of self-employment: Documentation showing you’ve been self-employed for at least two years gives lenders confidence in your income stability.
• Business license: If possible, you’ll need to share a current, valid business license registered in your name or your company’s name.
• Articles of incorporation or DBA: Provide your legal business formation documents, whether that’s incorporation papers or a “Doing Business As” registration.
• CPA letter: This document, prepared by a certified public accountant, verifies your business ownership and how long you’ve been operating (not always required).

Profit & Loss Statements

Profit and loss statements are not always required, but they do give lenders insight into your business’s financial health and income trends. You can submit P&L statements prepared by your CPA or create them yourself, though both must be signed.

These statements help establish that your earnings are reliable and not subject to wild fluctuations that might make repayment difficult. Even if you prepare your own statements, make sure they’re detailed and accurate. They should cover the same timeframe as your bank statements and reflect the deposits shown in those accounts.

Mortgage and Property Documents

When you’re purchasing or refinancing a property, you’ll need transaction-specific documentation. Here are the documents you’ll need:

• Purchase agreement: The signed contract showing property details and the agreed price for home purchases.
• Real estate agent contact information: Your agent’s name, phone number, and email if you’re working with one.

The purchase agreement and agent details help lenders assess the property value, verify transaction details, and coordinate with other parties involved.

Once you apply for the mortgage, your lender will order an appraisal to determine the property’s current market value, which is critical for both purchases and refinances. You’ll receive a copy of the appraisal report once it’s completed.

The lender will also provide an estimated closing disclosure during the process, followed by a final closing disclosure a few days before closing that outlines your closing costs, loan terms, and cash needed to close. Numbers may shift between the estimated and final versions based on changes to your loan terms, updated property taxes, insurance costs, or other closing adjustments.

Credit Authorization & Other Forms

Standard lending forms allow lenders to access your credit history and process your application properly. Here are the forms you’ll need to complete:

• Signed borrower authorization form: This gives the lender permission to verify the information you’ve provided and access necessary records.
• Credit report consent: You’ll authorize the lender to pull your credit report.
• Loan application: The formal application form captures your personal information, employment details, assets, debts, and the loan amount you’re requesting.

These administrative documents are straightforward but essential. Without proper authorization, lenders can’t move forward with underwriting your loan.

Optional Documents to Strengthen Your Application

While not strictly required, certain supporting documents can improve your chances of approval and help you secure better loan terms. Your lender may ask for these bank statement loan documents:

• Letter of explanation: If you have large deposits that aren’t regular income or gaps in your banking history, a clear written explanation helps underwriters understand your situation.
• Proof of other income sources: Documentation of rental income, investment returns, royalties, or other earnings demonstrates additional financial stability.
• Asset statements: Showing retirement accounts, savings balances, or investment portfolios proves you have reserves beyond your regular income.
• Co-borrower documents: If you’re applying with a spouse or partner, include their identification, income documentation, and credit authorization as well.

Common Mistakes to Avoid

Many bank statement loan applications get delayed or declined because of preventable errors. Watch out for these frequent pitfalls:

• Submitting incomplete bank statements: Missing even one page from a single month can stall your application while the lender requests additional documentation.
• Using multiple bank accounts without consistency: Switching between different accounts makes it harder for lenders to track your income patterns and may raise concerns about financial instability.
• Forgetting the CPA letter: For business income verification, this document is commonly required (Although not always mandatory). However, many borrowers overlook it until the lender specifically requests it.
• Ignoring credit profile basics: Just because you don’t need tax returns doesn’t mean credit doesn’t matter. Late payments, high debt ratios, and low credit scores can still negatively impact your application.

The best approach is to gather everything upfront and double-check that your documentation tells a complete, consistent story about your financial situation. Before you submit your documents and application, use a bank statement loan calculator or bank statement loan refinance calculator to estimate what you can afford and ensure your income documentation will support that amount.

Partner With Griffin Funding for Your Bank Statement Loan

At Griffin Funding, we understand that self-employed borrowers need flexible financing solutions. Our streamlined bank statement loan document checklist and experienced loan officers make the application process straightforward.

Ready to get started? Download the Griffin Gold app to track your application progress and access your loan documents anytime. Our team specializes in helping entrepreneurs and independent professionals achieve their homeownership goals with confidence.

Get started online today or contact our team to learn more about your financing options.

The post Bank Statement Loan Document Checklist appeared first on Griffin Funding.

Bank Statement Loan Refinance Calculator

What Is a Bank Statement Loan?

A bank statement loan is a type of non-qualified mortgage (non-QM) created for borrowers who may not meet traditional income verification requirements but can demonstrate consistent income through bank deposits. Instead of relying on W-2s or tax returns, lenders assess your income based on 12 or 24 months of bank statements (either personal or business) depending on your situation.

This type of loan is particularly beneficial for:

• Self-employed individuals
• Freelancers
• Contractors
• Business owners
• Commission-based workers

The key difference from a traditional mortgage is how income is verified. While a conventional loan looks at net income reported to the IRS, a bank statement loan focuses on your gross deposits—providing a more accurate picture for those who have significant write-offs or seasonal income.

Because of this flexibility, bank statement loans have become a popular alternative for self-employed borrowers who want to buy or refinance a home without jumping through the hoops of traditional lending guidelines.

Bank Statement Loan Refinance Programs

If you already have a bank statement loan, you don’t have to stick with the original terms forever. Many borrowers choose to refinance their bank statement loan to get:

• A lower interest rate
• A shorter or longer loan term
• A reduced monthly payment
• Access to cash-out equity

A bank statement cash-out refinance loan allows you to tap into your home’s equity — up to 80% of the property’s value — and receive funds that can be used for anything from home renovations to business investments. This type of refinancing is especially attractive to self-employed borrowers who want to avoid the complexity of traditional cash-out refinance approvals.

Griffin Funding offers specialized refinance options that are tailored for self-employed individuals, ensuring the process is smooth, fast, and fully aligned with your income structure.

Benefits of a Bank Statement Refinance Loan

Refinancing a bank statement loan comes with a range of advantages, especially for those navigating the mortgage world with non-traditional income. Here are some of the key benefits:

• Easier income verification: Instead of relying on tax returns, which often show reduced income due to business write-offs, lenders use your bank statements to verify income. You can choose to submit either 12 or 24 months of personal or business bank statements, depending on what best reflects your income pattern. This simplifies the underwriting process while still presenting an accurate picture of your financial health.
• Ideal for self-employed borrowers: Getting a mortgage when you’re self-employed can feel like an uphill battle. Traditional lenders may penalize you for fluctuating income, seasonal earnings, or business deductions. A bank statement refinance loan focuses on your gross deposits, making it much easier to qualify without needing to alter your business practices just to fit a lending mold.
• Potential for lower interest rates: Refinancing can help you lock in a more favorable interest rate, especially if your credit score, income, or market conditions have improved since you first secured your loan. A reduced rate can significantly lower your monthly mortgage payment and reduce the total interest paid over time.
• Lower monthly payments: Switching to a longer loan term or refinancing at a lower interest rate can help reduce your monthly mortgage payments. This creates extra breathing room in your monthly budget, allowing you to redirect funds toward savings, investments, or business expenses.
• Bank statement cash-out refinance option: Need funds for a renovation, emergency expense, or investment? A bank statement cash-out refinance loan allows you to borrow against up to 80% of your property’s value—based on your bank statement-qualified income—so you can put your home’s equity to work. This is a smart option for borrowers who don’t want to go through the hurdles of traditional cash-out refinancing.
• Flexible loan terms: Unlike many conventional refinancing options that box you into standard terms, bank statement refinance loans can be customized. Choose a loan length that aligns with your financial strategy, whether that’s paying off your mortgage faster or extending the term for a lower monthly payment.
• Tailored lending experience: At Griffin Funding, the process is tailored to meet your needs. Our team understands that no two self-employed borrowers are alike, and our programs are built with flexibility and responsiveness at their core. You’ll get personalized support from start to finish, ensuring a smoother and more efficient refinance process.

How the Bank Statement Loan Refinance Calculator Works

Refinancing doesn’t have to be a guessing game. The bank statement loan refinance calculator is a smart, intuitive tool designed to help self-employed borrowers understand the financial impact of refinancing their mortgage. By entering a few key data points, you can quickly estimate potential savings, projected payments, and qualification metrics, all without submitting paperwork or scheduling a call.

This calculator is especially helpful if you’re considering refinancing a bank statement loan you already have or if you’re exploring whether refinancing into one makes sense for your unique income situation.

What you’ll need to input:

• Number of bank statements: Choose whether you want to use 12 or 24 months of bank statements for income verification. The longer timeframe can offer a more stable average, while 12 months may be faster and more current.
• Loan type: Indicate whether your bank statements are from a business or personal account. Business accounts may show higher gross deposits, but both are acceptable depending on how you earn income.
• Monthly bank statement deposits ($): Input your average monthly deposits. This figure is used to estimate your qualified gross annual income.
• Existing mortgage balance: The total amount you still owe on your current mortgage.
• Current interest rate (%): Enter the rate you’re currently paying so the calculator can compare it to your potential new rate.
• Estimated property value: Your home’s current market value. This helps determine your loan-to-value (LTV) ratio, which is critical for refinancing eligibility and terms.
• Refinance loan term (years): Select the desired length of your new loan, such as 15, 20, or 30 years. This will influence your monthly payment and total savings.
• New interest rate (%): Enter the refinance rate you think you might qualify for—or test different scenarios to see how rate changes affect your monthly and long-term savings.

What you’ll see in the results:

• Qualified gross annual income ($): The calculator multiplies your average monthly deposits by 12 to 24 months, giving you an estimated annual income that lenders may use to qualify you for the refinance.
• Estimated LTV ratio (%): This percentage shows how much of your home’s value your new loan would cover. A lower LTV can lead to better rates and terms.
• Estimated monthly payment: Based on your inputs, this is the predicted monthly cost of your new mortgage.
• Monthly savings: See how much less you could be paying each month compared to your current mortgage.
• Total savings over loan term: Estimates how much money you’ll save over the full life of your refinance loan—factoring in interest and payments.

By adjusting the inputs, you can quickly compare different refinance scenarios and understand how much you might benefit by refinancing your bank statement loan. If you’re just getting started and want to assess your initial mortgage eligibility based on bank deposits, try using our bank statement loan calculator. It’s a great tool for borrowers still in the research phase who are exploring the broader benefits of bank statement-based lending before diving into refinancing.

See If a Bank Statement Refinance Loan Is Right for You

If you’re self-employed or have non-traditional income and want more control over your mortgage, a bank statement refinance loan might be your best next move. Whether you’re aiming to lower your payment, get better terms, or tap into your home’s equity, refinancing can offer real financial benefits.

At Griffin Funding, we specialize in working with self-employed individuals to make homeownership and refinancing more accessible. Our team understands your unique income structure and will guide you through every step of the process. With tools like our bank statement loan refinance calculator and the Griffin Gold app, you can explore your options and manage your mortgage journey with confidence and ease.

Get started online today!

The post Bank Statement Loan Refinance Calculator appeared first on Griffin Funding.

A bank statement loan is designed for self-employed borrowers who have difficulty providing their income through traditional documentation. These non-QM loans offer flexibility that conventional mortgages simply can’t match. 

Here’s who typically benefits from bank statement loans: 

• Business owners: Those who own their own companies and take significant tax deductions that reduce their reported income on tax returns.
• Independent contractors: Professionals who work for themselves and receive 1099s rather than W-2s from multiple clients or companies.
• Freelancers and consultants: Creative professionals, writers, designers, and consultants who have irregular income patterns but strong earning potential.
• Real estate agents: Agents whose commission-based income can vary from month to month.
• Construction contractors: Builders, electricians, plumbers, and other trades professionals who run their own businesses.
• Restaurant owners: Food service entrepreneurs whose cash-heavy businesses may not reflect true income on tax documents.
• Medical professionals: Doctors, dentists, therapists, and other healthcare providers who own their practices and take business deductions.

The key requirement is being self-employed for at least two years, though some lenders may consider shorter business histories with strong financial profiles.

Bank Statement Loan Use Cases

Let’s dive into specific bank statement loan use case scenarios. These examples will help you understand how bank statement mortgages work in practice. 

• 1. “I’m self-employed and looking to buy a home but take advantage of a lot of write-offs in order to minimize my tax burden. This means my tax returns aren’t a great way to show my income. Would a bank statement loan be appropriate in this case?”

Absolutely. This is the perfect bank statement loan scenario. When you’re self-employed and taking legitimate business deductions to reduce your tax liability, your tax returns often don’t reflect your actual cash flow or ability to make mortgage payments. 

Let’s look at a bank statement loan example: Instead of looking at your adjusted gross income from tax returns, the lender will review 12-24 months of your business or personal bank statements. They calculate your average monthly deposits and use that figure to determine your qualifying income. 

For instance, if your tax return shows $60,000 in income after deductions, but your bank statements show consistent monthly deposits of $12,000 ($144,000 annually), the bank statement loan would qualify you based on the higher amount.

• 2. “I’m self-employed and interested in buying a home. However, I don’t qualify for a conventional mortgage due to tax write-offs. In this case, would a bank statement loan or asset-based loan be better?”

The answer depends on your specific situation and the consistency of your income. Choose a bank statement loan if you have regular, consistent deposits in your business accounts and have been self-employed for at least two years. 

At the same time, you might also consider an asset-based loan if your income is highly irregular, you haven’t been in business very long, or you have significant liquid assets but inconsistent cash flow.

Most self-employed borrowers find bank statement loans more favorable because they’re based on actual business performance rather than just asset value. A bank statement loan calculator can help you estimate your qualifying income based on your deposits.

• 3. “I’ve been running the family business for years and am looking to buy a home. The business has been around for 20 years and I’ve been acting owner for the last 10 years, but I only became the official owner last year once my father officially retired. Could I still qualify for a bank statement loan?”

Yes, you can still qualify, but you’ll need to document your role carefully. Lenders understand that family business transitions don’t always happen on paper immediately.

You’ll need documentation showing your operational control over the past two years, such as signing authority on business accounts, contracts in your name, or business licenses listing you as the operator. Bank statements should show consistent deposits under your management, not just since the official ownership transfer.

This bank statement mortgage example shows why lenders look at substance over form — they care more about who’s actually running the business and generating income than just official paperwork dates.

• 4. “I’ve been a real estate agent for the past 12 years but in the last few years began flipping houses on the side. If I apply for a bank statement loan, will the lender only count my commission income? Or will the cash deposits made from flipping houses be taken into account as well?”

Lenders will consider both income sources, which is great news for your qualifying power. Your commission income from real estate sales will be straightforward to verify through your business bank statements.

For house flipping income, lenders will examine the deposits from property sales but may apply different calculations. Since flipping income can be irregular and project-based, they might average it over a longer period or apply a lower percentage to account for the cyclical nature.

To strengthen your application, keep detailed records of your flipping projects, including purchase contracts, renovation receipts, and sale proceeds.

• 5. “The pre-approval amount for my bank statement loan was lower than I expected. How is monthly income calculated with bank statement loans? And how could I potentially increase my pre-approval amount?”

Bank statement loan income calculation typically works by averaging your monthly deposits over 12-24 months. The percentage of deposits that are counted as income depend on whether funds are deposited into a personal or business account. 100% of personal deposits are counted towards income for a bank statement loan, while typically 50% of business deposits are counted. 

Here’s how this works: If your average monthly deposits are $10,000, the lender might use 50% of that ($5,000) as your qualifying income.

To increase your pre-approval amount, you can: 

• Provide additional months of statements showing higher deposits
• Document business expenses separately if they’re lower than the lender’s assumed percentage. For example, if you have a business with only 25% in expenses and can provide a CPA letter verifying such you’ll be able to qualify for a higher mortgage loan amount.
• Include all business accounts
• Consider a self-employed mortgage with additional documentation, like profit and loss statements

• 6. “I’m self-employed and my spouse has a W-2 job. We want to maximize the loan amount we qualify for, but the write-offs I take significantly reduce eligible income for a conventional loan. If we use a bank statement loan, would it take my spouse’s W-2 income into consideration?”

Yes, this is often the ideal scenario for maximizing your loan amount. Most lenders will combine your bank statement income with your spouse’s W-2 income to calculate your total household qualifying income.

Your spouse’s W-2 income gets calculated using standard debt-to-income ratios, while your self-employed income gets calculated using the bank statement method. The lender then adds both income sources together for your total qualifying income.

This hybrid approach often results in better loan terms since W-2 income is considered more stable by lenders.

• 7. “I own half of a company, with the other half owned by a business partner. Can I still qualify for a bank statement loan?”

Yes, you can still qualify, but you’ll need additional documentation to verify your ownership percentage and income allocation. You’ll need partnership agreements that clearly show your 50% ownership stake. The lender will calculate your qualifying income based on your percentage of the business deposits.

Bank statements should ideally show separate draws or distributions to each partner. If the business mixes all income in shared accounts, you might need your accountant to provide a letter explaining how income is allocated between partners.

Have More Questions About Bank Statement Loans?

Bank statement loans offer incredible flexibility for self-employed borrowers who don’t fit into the conventional mortgage box. Whether you want to purchase a home,  need a self-employed refinance, or are exploring a self-employed home equity loan, these programs can help you achieve your homeownership goals.

At Griffin Funding, we specialize in helping entrepreneurs and business owners navigate the mortgage process. Ready to explore your options? Reach out to connect with our team and explore your options, download the Griffin Gold app to compare loan options, or get started online today. 

The post Bank Statement Loan Examples & Use Cases appeared first on Griffin Funding.

Keep reading to learn more about no doc business loans and the key aspects you need to know before considering this financing option. 

What Is a No Doc Business Loan?

A no doc business loan is a type of non-QM loan option designed for investors or entrepreneurs that minimizes the documentation requirements typically associated with traditional business loans. There is no such thing as a “no doc loan,” only a low doc loan — every loan will require at least some documentation. Ultimately, a business loan with no documentation doesn’t exist. However, no doc business loans are designed to minimize paperwork and provide more flexible lending requirements while streamlining the application process. 

Similar to a no doc loan for home buyers, the primary feature of a no doc business loan is its relaxed documentation requirements, making it a potentially faster and more accessible option for certain borrowers. While traditional business loans often demand extensive documentation, such as tax returns, financial statements, and business plans, a no doc business loan typically requires less paperwork. Instead, no doc loans are more like bank statement loans and only require the borrower to submit bank statements. An asset-based loan can also be considered a type of no doc business loan. 

This type of loan can be particularly appealing to entrepreneurs who may face challenges in providing the extensive documentation required by traditional lenders. 

There are also no doc home equity loans and no doc business line of credit loans available for those who want to tap into their property’s equity and access funds for various investment needs. 

How Does a No Doc Business Loan Work?

A no doc loan is typically either a bank statement loan or asset-based loan, both of which work similarly. With a bank statement loan, the documentation focuses on bank statements. With these loans, lenders assess the health of the business by reviewing bank statements to analyze cash flow, incoming revenue, and overall financial stability. 

Asset-based loans are similar to bank statement loans. However, these loans center around the borrower’s assets, which are converted to income to qualify for the loan. Lenders evaluate the value and liquidity of the assets to assess the overall risk involved. 

For both types of no doc business loans, the process looks like this: 

• Application: Borrowers initiate the process by submitting a loan application. The application often requires basic information about the business, its financial health, and the purpose of the loan. 
• Limited documentation: Unlike traditional loans that demand extensive documentation, a no doc business loan requires minimal paperwork. Your lender will tell you the type of documentation they need to proceed with evaluating your application. 
• Credit evaluation: Lenders typically place emphasis on the creditworthiness of the borrower for most loans. A strong credit history may play a significant role in the approval process and help you get a lower interest rate. 
• Approval and terms: Upon reviewing the limited documentation and evaluating creditworthiness, lenders decide on loan approval and establish terms, including interest rates, repayment periods, and the total loan amount. 
• Funding: once the borrower agrees to the terms, the funds are disbursed. Borrowers are responsible for repaying the loan according to the agreed-upon terms. 

Pros and Cons of No Doc Business Loans

No doc business loans are a compelling alternative for entrepreneurs seeking expedited access to capital for their next real estate project or business venture. However, like all loans, they come with their pros and cons. 

The pros of no doc business loans include the following: 

• Streamlined application process: The reduced documentation requirements result in a faster and more straightforward application process compared to traditional loans. 
• Quick access to funds: With fewer documents to review, lenders can expedite the approval process, providing investors with quicker access to capital. 
• Flexibility in approval: No doc loans may offer greater flexibility in approval, as they rely less on traditional documentation. 

While no doc loans can be a great alternative for those struggling to get approval for traditional loans with limited documentation, they come with potential cons, such as: 

• Higher interest rates: Due to the perceived risk associated with limited documentation, lenders may charge higher interest rates compared to traditional mortgages. 
• Potential for overleveraging: The ease of obtaining funds with minimal documentation may pose a risk of overleveraging, where investors borrow more than they can reasonably handle. 
• Varied terms and conditions: No doc business loans may come with less standardized terms, necessitating careful review to ensure the terms align with your business or investment goals. 

Alternatives to No Doc Business Loans

There are several alternatives to no doc business loans that investors can explore, each with its own set of requirements and considerations. Here are some types of non-QM and traditional loans investors can consider for financing: 

• Bank statement loans: Bank statement loans are a type of no doc loan. Instead of traditional income documentation, lenders review the borrower’s personal and/or business bank statements to assess financial stability. This option is suitable for self-employed individuals and business owners who may have irregular income streams. There’s also a bank statement HELOAN option if you want to tap into your property’s equity and increase your cash flow for other investment purposes. 
• Asset-based loans: Asset-based loans are another type of no doc business loan. Instead of focusing solely on bank statements, lenders assess the borrower’s assets and determine the loan amount based on the value of those assets. This option is useful for investors with valuable assets but potentially irregular income. 
• DSCR loans: DSCR loans flip the focus from the borrower to the property, focusing solely on its income-generating potential rather than the borrower’s personal income. The lender assesses the property’s ability to generate sufficient income to cover the debt service, including the mortgage. These loans are ideal for commercial real estate investors and may offer higher loan amounts for properties with strong income potential. 

Determine Whether a No Doc Business Loan Is Right for You

As an investor or entrepreneur exploring financing options, the decision to opt for a no doc business loan depends on your specific circumstances and financial goals. The streamlined application process and reduced documentation requirements make these loans appealing, especially for those in need of quick access to capital for real estate projects. 

Consulting with mortgage professionals like Griffin Funding can provide valuable insights and help you determine the most suitable financing solution for your investment endeavors. Download the Griffin Gold app today to assess your financial situation or apply for a loan online. 

The post No Doc Business Loans: What You Need to Know appeared first on Griffin Funding.

How Do Bank Statement Loans Work?

For certain individuals, their yearly income taxes do not reflect their actual income. This is especially true for those who are business owners, independent contractors, self-employed, freelancers, or retirees, who make up a sizable portion of the population. In fact, there are nearly 17 million self-employed people in the United States, making up over 10% of the total working population.

This can make things difficult when it comes time to apply for a traditional mortgage loan, which measures a borrower’s income using pay stubs and tax returns. Due to this, entrepreneurs and those who do not receive a W-2 from an employer often do not qualify for a mortgage.

A bank statement loan is the perfect solution for those who need an alternate way to verify their income to ensure mortgage approval. Instead of qualifying for a home loan based on your income taxes, bank statement loans are a no-income verification mortgage where qualification is based on your bank statements as opposed to your tax returns.

With a bank statement loan, the lender typically requires several months of bank statements to prove you are financially able to repay the loan. To qualify for this type of financing, you will usually need to provide a lender between 12 and 24 months of bank statement deposits. In some cases, you may even be able to secure a three month bank statement loan if you’re an exceptionally qualified borrower. This type of financing is also a great option for retirees looking for a retirement mortgage since it allows them to qualify on their bank deposits, savings or investment income.

Types of Bank Statement Loans

Bank statement loans come in different forms to fit the unique needs of borrowers with non-traditional income. 

Whether you’re buying a home, refinancing your mortgage, or tapping into your home’s equity, bank statement loans provide flexible options tailored to your financial situation.

• Bank statement purchase loans: These loans are designed for self-employed borrowers or individuals with non-traditional income who want to buy a home. Instead of relying on pay stubs or tax returns, this loan allows you to qualify based on your bank deposits.
• Bank statement refinance loans: Bank statement refinance loans enable you to tap into your home’s existing equity and convert it into cash. You can adjust your existing mortgage by extending your loan term, locking in a better interest rate, or changing certain loan terms.
• Bank statement home equity loans: These loans allow you to tap into your home’s equity to access funds for major expenses, investments, or emergencies. Instead of going with a traditional income verification, bank statement home equity loans use bank statements to determine eligibility.
• P&L loans: Profit and loss (P&L) loans are specifically designed for business owners whose taxable income may not reflect their actual financial situation. This type of loan uses P&L statements instead of tax returns to verify income.
• 1099 loans: 1099 mortgage loans allow independent contractors and gig workers to use their self-employment income for homeownership without the traditional W-2 requirements.

How to Use the Bank Statement Loan Calculator

Determining how much you can afford to borrow when securing a home loan can help you start the search for your dream home before applying for a loan. We can help you determine how much home you can afford based on your current financial situation. Follow these steps to get an estimate of how much home you can afford using a bank statement loan:

1. Check Your Loan Type

Our bank statement loan calculator works for personal and business property loans to help borrowers of all types determine how much they can afford to borrow.

2. Enter Bank Statement & Other Income Information

Your income is a significant factor in determining your ability to repay. Enter your bank statement income and share your gross annual income and down payment amount to determine your loan amount. Remember, the higher your down payment, the less you’ll need to borrow. Additionally, a down payment of 20% can help you avoid private mortgage insurance (PMI) that increases your monthly payments.

3. Provide Monthly Debt Information

Your monthly debts are subtracted from your monthly income to determine how much cash you have on hand throughout the month. Debts included are:

• Credit cards
• Mortgages
• Auto loans
• Student loans
• Personal loans
• Child support and alimony

4. Indicate Monthly Housing Expenses

Monthly housing expenses include property tax, PMI, HOA fees, utilities, and homeowners insurance. Our bank statement mortgage calculator considers these monthly housing expenses, subtracting them from your total monthly income to determine the loan amount.

5. Enter Available Fund Amounts

How much have you saved for purchasing a home? Entering your available funds saved for down payment, closing costs, and maximum principal and interest (PI) payments can help determine whether you can afford the loan and associated costs.

6. Provide Funding Information

Tell us about the loan you want, including the term, interest rate, down payment, home price,
estimated closing costs, and total loan amount.

Download the Griffin Gold app today!

Take charge of your financial wellness and achieve your homeownership goals

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Key Benefits of Bank Statement Loans

Bank statement loans are a great option for self-employed individuals, freelancers, and business owners with non-traditional income. These loans offer flexibility and accessibility that traditional mortgages often lack. 

Other key benefits include:

• Qualify with bank statements: Borrowers can qualify using 12-24 months of bank deposits instead of W-2s or tax returns.
• High loan limits: Higher loan limits allow you to borrow up to $20 million in home financing. 
• Down payments as low as 10%: Qualified borrowers can get a bank statement loan with as little as 10% down. 
• Purchase vacation and investment properties: Bank statement loans can be used to buy not just a primary residence, but also vacation homes and investment properties. 
• Streamlined application process: Bank statement loans often have a simpler application process, especially with experienced lenders.
• Flexible qualification requirements: There is higher credit flexibility available to borrowers with lower credit scores compared to traditional loans.

Bank Statement Loan Qualification Requirements 

Instead of relying on traditional documentation like W-2s or tax returns, these loans focus on your bank deposits to determine eligibility. 

To qualify for a bank statement loan, borrowers must:

• Be self-employed or a business owner for at least two years.
• Provide 12-24 months of personal or business bank statements.
• Minimum credit score of 620.
• A down payment of at least 10% of the home’s purchase price.
• Maintain a DTI ratio of 50% or lower.
• Provide proof of business ownership, such as a license or registration.

The 28/36% Rule

Your debt-to-income ratio is an important indicator of whether you can afford to pay back a loan by comparing how much you earn to your monthly debts. DTI requirements vary by lender, but generally, they want to see a DTI of 43% or lower. The ideal DTI is 36%, with 28% of the debt going toward the mortgage payment.

In other words, lenders want to see 28% of your income spent on housing expenses and no more than 36% on total debts, including mortgage, credit card, and loan payments. This rule is often used to determine eligibility for a loan and can help borrowers determine if they can afford one.

Try Our Bank Statement Mortgage Calculator Today

Are you ready to become a homeowner? Griffin Funding’s bank statement calculator can help determine if now is the right time to purchase a home. As a nationwide mortgage lender, we offer a variety of loan programs for any type of borrower. Secure funding for your dream home by getting started online today.

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However, not everyone has these documents, or they may not accurately reflect their full income. Some first-time buyers might be shocked to find out they don’t qualify for a traditional home loan because they don’t have the proper documentation.

Self-employed individuals, retirees, business owners, gig workers, and entrepreneurs don’t have W-2s or paystubs because they don’t have traditional jobs. Meanwhile, these same individuals may take significant deductions during the tax season that reduce their taxable income, so tax returns aren’t always an accurate representation of someone’s financial health.

If you don’t qualify for a conventional mortgage because of these factors, you may still qualify for a non-qualified mortgage — or non-QM loan — like an asset depletion mortgage. But what is an asset depletion loan, and is it the right option for you? Keep reading to learn more.

What Is an Asset Depletion Mortgage?

An asset depletion mortgage, also known as an asset-based home loan, is a type of mortgage loan that allows you to qualify by using your assets as income. Unlike other types of asset-based lending, asset-based mortgages don’t use your assets as collateral. Instead, lenders convert your assets into income to determine whether you have enough money to repay the loan.

An asset depletion mortgage doesn’t require proof of employment income, which some borrowers may not have. For instance, if you’re looking for a mortgage when self-employed, you don’t have pay stubs or W-2s, and your tax returns likely don’t reflect the true state of your finances. If you don’t qualify for a traditional home loan, an asset depletion mortgage might be right for you.

Asset depletion loans are also a retirement mortgage option because you can qualify using your savings and retirement accounts. These types of home loans can benefit individuals who don’t have a regular source of income or the documentation required by conventional loans.

How Does an Asset Depletion Mortgage Work?

An asset depletion loan lets you pay your mortgage by depleting your assets. You can only use liquid assets to qualify for a home loan, so your car, high-end art, and other expensive assets you own aren’t eligible.

With an asset depletion mortgage, you borrow against your liquid assets, which may include:

• Bank accounts (checkings & savings)
• Certificates of deposits (CDs)
• Retirement and investment accounts (stocks, bonds, and mutual funds)
• Money market accounts

There are limits on the amounts of your assets you can use to qualify for a loan. You can use:

• 70% of your retirement assets
• 80% of the remaining value of stocks and bonds
• 100% of your checking, savings, and money market accounts.

So, let’s say you have $1,000,000 in retirement and investment accounts and $500,000 in your checking and savings accounts. In this case, you’d be able to use $1,200,000 in assets to qualify for an asset depletion loan.

Once the lender determines your asset depletion mortgage eligibility, they can calculate the loan amount by determining your monthly income based on the loan terms.

Your assets’ value, or rather, your income as determined by your assets, is not the only factor lenders consider. Asset depletion mortgages work similarly to any other type of mortgage. You must meet a lender’s criteria to be eligible, which means fulfilling requirements like meeting a minimum credit score and down payment amount.

The only difference between these loans and other types of loans is what qualifies as income; instead of employment income, you can qualify for an asset depletion mortgage based on your assets. Therefore, you won’t be required to provide tax returns, pay stubs, or W-2s.

However, your lender might request this information if you have them because they can help determine whether you can get approved for a home loan. For instance, if you work a full-time job and freelance, your lender may want to see your employment income and assets to determine eligibility and loan amount.

How Is an Asset Depletion Loan Calculated?

An asset depletion loan is calculated by converting your assets into income. As we touched on earlier, you can use up to 100% of liquid accounts (checking, savings, and money market), 80% of the remaining value of stocks and bonds, and 70% of retirement assets to qualify for an asset-based loan.

When it comes to calculating qualifying income for an asset depletion loan, you have two options. You can either use a debt ratio calculation or a total asset calculation.

With a debt ratio calculation, borrowers must have at least $1 million in qualified assets or 1.5 times the loan balance, whichever is the lesser of the two figures. Both of these figures must include net down payment, closing costs, and required reserves to qualify. Once you have determined net qualified assets, the calculation is as follows:

You can also calculate qualifying income for an asset depletion loan using a total asset calculation. In this case, your qualified assets must be able to cover the following expenses:

• New loan amount
• Down payment
• Closing costs
• Required reserves
• 5 years of current monthly obligations

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Are You Eligible for an Asset Depletion Loan?

Income is an important factor qualifying criterion for determining whether you qualify for a loan and your loan amount. However, it’s not the only factor lenders consider.

To determine if you’re eligible for an asset depletion loan, you can add up your liquid assets and use the formula we discussed above to calculate your monthly cash flow, which lenders will consider your income. Then, they’ll compare that to your monthly debts to determine if you can afford to repay the mortgage loan.

Other eligibility requirements for asset depletion mortgages include the following:

• Age to qualify using retirement accounts: If you want to qualify for an asset depletion mortgage using your retirement accounts (IRAs, 401ks, and so forth), you’ll need to be around retirement age, usually at least 59 ½ or older.
• Down payment: Asset depletion mortgages are a higher risk for lenders because they don’t require employment or employment income verification. Many lenders mitigate their risk of lending to you by requiring a 20% down payment, which reduces the total loan amount. Exact down payment requirements vary by lender.
• Minimum credit score: The credit score requirement varies by lender, but most like to see a score of at least 650, but some may accept credit scores as low as 620. A higher credit score can qualify you for a better interest rate, so it’s worth working to increase your score before applying for an asset depletion loan.

What Are the Benefits of an Asset Depletion Mortgage?

Some of the key benefits of asset depletion mortgage loans are:

• No tax returns required: Qualify using your liquid assets rather than tax returns.
• No employment verification: You don’t need to be employed to qualify for an asset depletion mortgage and there is no employment income verification.
• Borrow up to $3 million: Qualified borrowers can access up to $3 million in financing.
• DTI ratio not calculated in most cases: Your debt-to-income (DTI) ratio is typically not considered during the loan application and underwriting process.
• Finance second homes and investment properties: Using an asset depletion mortgage, you can buy a primary residence, a vacation home, or an investment property.

Who Is an Asset Depletion Loan Best Suited for?

We’ve already touched on a few types of borrowers that can benefit from asset depletion loans, but let’s review them again to help you determine whether they’re the right fit for you. Asset depletion loans are best suited for:

• Self-employed borrowers and business owners who take significant tax deductions
• Retirees with substantial assets
• High-net-worth individuals with no income but significant assets

Apply for an Asset Depletion Mortgage

An asset depletion mortgage can help you achieve your dreams of homeownership without verifying employment income. Instead, you can use your bank accounts, retirement savings, and investments as income to qualify for a home loan.

Griffin Funding is a premier asset depletion mortgage lender that can help you determine whether this type of loan is right for you. If not, our mortgage experts can help you find the best home loan for your unique circumstances. Get started online today or contact us at 855-698-1098 to learn more about our mortgage offerings.

The post What Is an Asset Depletion Mortgage & Is It Right for You? appeared first on Griffin Funding.

Conventional mortgage loans have strict lending criteria and income verification methods that aren’t right for every borrower. For instance, some borrowers don’t have W-2s or pay stubs because they’re entrepreneurs or investors. Luckily, those types of borrowers can still get a mortgage, but they may qualify for a different type of mortgage.

If you don’t meet the stringent lending requirements of a conventional loan, you may qualify for a no-income, no-asset (NINA) loan. Current NINA loans are only available for investors and not for owner-occupied properties like primary residences. Wondering if a no-income, no-asset loan is right for you? Keep reading to learn more about NINA loans.

What Is a NINA Loan?

No income, no asset loans are a type of no doc loan in which the lender doesn’t verify income or assets. However, they do verify other information like rental income and credit history. These loans are currently only available for real estate investors purchasing rental property. Instead of verifying assets and income, NINA loan lenders will review the rental income to determine a borrower’s ability to repay the mortgage loan.

NINA loans were once available for primary residences and made a good option for business owners, self-employed individuals, and gig workers who couldn’t use traditional income verification methods because they don’t have W-2s or pay stubs. NINA loans are just one type of loan with no income verification required. They made it easier for individuals to qualify for loans if they couldn’t prove their income using traditional underwriting methods.

However, NINA loans became dangerous because lenders didn’t verify important information like income or assets, so they didn’t actually know whether a borrower could repay their debt. Many people foreclosed on their homes because the lender didn’t do their due diligence.

NINA and stated-income loans were popular around the same time and contributed to the housing crash, after which the federal government passed laws requiring lenders to verify that borrowers could afford to repay their mortgage loans. These new laws were designed to protect borrowers and prevent them from securing a loan they couldn’t afford.

The only exceptions to the new laws are investment properties, which allow lenders to determine their loan qualifications. However, NINA loan lenders must still verify that a borrower can repay their mortgage loan in some way. While NINA loans don’t require the lender to verify income or assets, the lender instead verifies that the property generates enough rental income to pay for the mortgage.

As such, NINA loans have more flexible lending criteria and could be a good option for both new and veteran investors. Unfortunately, most financial institutions don’t offer these types of loans because they can’t be sold on the secondary mortgage market. However, private lenders might.

NINA Loans vs. NINJA Loans

While NINA loans have some of the most flexible lending requirements available, they’re often confused with NINJA loans, which are even more flexible. NINJA stands for “no income, no job, no assets,” meaning a lender doesn’t verify income, employment, or assets and is primarily based on the borrower’s credit score.

These types of loans are even rarer than NINA loans, but they still allow investors to qualify for an investment property loan based on cash flow rather than personal income, assets, or employment.

Who Are NINA Loans for?

NINA loans were once designed for retirees, business owners, and freelancers because they didn’t verify income or assets. Instead, the lender took the borrower’s word for it when it came to these factors, which allowed borrowers to lie to obtain a home loan without realizing the significant consequences of taking out a loan they couldn’t afford.

Of course, anyone who lied on their mortgage application and couldn’t afford their monthly payments defaulted on their loan. These loans no longer exist for owner-occupied homes because NINA loan lenders must verify a borrower’s ability to repay using income and/or assets, regardless of the verification method. For instance, they can use W-2s, tax returns, bank statements, and pay stubs as long as they verify that a borrower can repay their debt.

Now, NINA loans are only available for investment properties, not owner-occupied primary residences. However, there are several no-income loans available for borrowers today, including asset-based and bank statement loans. Investors can also choose DSCR loans, which are similar to NINA loans in that they can qualify based on the rental property’s income instead of personal financial information.

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How Do NINA Loans Work?

With true NINA loans, lenders don’t require you to share your income or assets on the loan application. However, you’ll still need to meet various other requirements to qualify for the loan. With NINA loans, you can only finance investment properties, so they’re only available for individuals who wish to purchase rental properties or fix and flip homes. Otherwise, you won’t qualify for a NINA since they’re not an option for owner-occupied homes.

Additionally, since NINA loans don’t require you to share your income or asset information with lenders, they’re riskier for both lenders and borrowers. In some cases, they may be more challenging to qualify for than another type of investment property loan. For instance, NINA loan lenders typically require higher credit scores or charge higher interest rates.

At the same time, NINA loans typically come with significant down payment requirements. You’ll need to put down at least 20% on the property, and if you have a low credit score, the lender may require an even larger down payment.

So how exactly do NINA loans work? Instead of qualifying for the loan based on your personal income or assets, you’ll qualify based on the rental property’s performance. Lenders must determine your ability to repay by reviewing rental rates to ensure they’ll cover your mortgage payment.

While you don’t need to provide your lender with information regarding your personal income or assets, there are several other requirements you must meet for a NINA loan, such as:

• Credit score: Credit score is one of the main qualifying criteria for this loan because it’s the only figure lenders have available that tells them how creditworthy you are as a borrower. Lenders must ensure you have a track record of paying your debts on time.
• Employment type: Unlike NINJA loans, NINA loan lenders may require you to have at least two years of employment history.
• Underwriting and approval: Lenders must perform underwriting to ensure the information you have provided them is accurate and reliable. While they don’t need to determine if you have a reliable source of income, they still need to ensure the information they do require is true.
• Down payment: As we’ve mentioned, down payments are a requirement of this loan, but the exact amount you’ll need to pay will vary depending on your lender and factors like your credit score. Because NINA loans are riskier investments for lenders, the down payment acts as a type of protection because it means they won’t have to lend you as much to purchase the property. A larger down payment will also reduce your mortgage interest rates to help you pay less over the life of the loan.
• Reserves: Some lenders may require a few months’ worth of reserves to ensure you can make your mortgage payments. Since your property may not generate rental income immediately, having reserves can assure lenders that they’ll receive their payments.

NINA Loans: Pros & Cons

Investors looking to purchase rental properties can benefit from NINA loans because lenders determine eligibility without verifying income and assets. However, like all mortgage loans, NINA mortgages have their pros and cons.

Pros of NINA loans

NINA loans can help investors secure financing with more flexibility in terms of the information they can use to demonstrate their ability to repay the loan. Other benefits of this loan program include the following:

• No personal income requirements: Traditional mortgage loans require you to share personal income information in the form of tax returns, bank statements, and W-2s, depending on your employment situation. However, with a NINA mortgage, you can qualify for a loan based on the rental income of the property you wish to purchase. That said, being able to provide your lender with as much financial information as possible can make you a more appealing borrower.
• Easy access to financing: Since most investors take significant deductions from their tax returns, these documents don’t accurately represent their income. With NINA loans, your tax returns, bank statements, and other personal financial information is less important because you can qualify for the loan based on rental income.
• Streamlined underwriting process: Since NINA loans don’t require an underwriter to verify your personal financial information, getting approved for a mortgage is often much faster. With these loans, you can close on a property and start generating rental income faster.

Cons of NINA loans

The main benefit of a NINA mortgage loan is that you can qualify based on rental income instead of personal income. However, these loans are riskier investments for the lender, so they come with various disadvantages, such as:

• Higher down payments: NINA mortgage loans are no-doc loans, which means they’re a higher risk for the lender. To mitigate their risk, lenders typically require higher down payments. The minimum down payment for a NINA loan is usually 20% of the purchase price, but some lenders may charge even more depending on various factors like your credit score. If you can make a higher down payment, you can reduce how much you need to borrow and save more money on the life of the loan.
• Higher interest rates: Typically, NINA loans have higher interest rates and less favorable terms because they’re riskier for the lender. Some lenders may only offer adjustable-rate NINA loans, which can cost you even more over the life of the loan, especially if mortgage rates increase.
• Higher credit score requirements: NINA mortgage loans have much more flexible lending requirements. However, because the lender primarily determines your eligibility based on your potential rental income, they may look at your credit score with more scrutiny. Therefore, you typically need a higher credit score for NINA loans than conventional loans to ensure the lender you have a history of paying your debts on time.
• Not offered by every lender: Many lenders don’t offer NINA loans because they’re riskier investments. However, many lenders offer loans similar to NINA loans that allow you to qualify for a mortgage based on rental property income. Lenders also offer Non-QM loans that allow you to qualify for a mortgage using alternate income verification methods like bank statements and assets.
• Job requirement: Most home loans have a job history requirement to ensure you have a steady source of income. However, investors may be self-employed. As long as you can demonstrate that you’ve been employed or self-employed for at least two years, you should still qualify for a NINA loan if you meet the other loan criteria. Most lenders require at least two years of work history, so you’ll have to provide ample evidence that you’ve been an investor for at least two years or have had a steady job for at least two years. NINJA loans don’t require you to submit employment history information, but these loans no longer exist today.

Types of No-Income Loans

True NINA loans are only available for non-owner-occupied investment properties. Therefore, if you’re looking for a loan for a primary residence, you won’t qualify for a NINA mortgage. However, there are several other no-income loan options available for owner-occupied properties. These types of loans are best suited for freelancers, self-employed individuals, retirees, and business owners who can’t prove their income using traditional methods. A few of the most popular no-income loans today include the following:

Bank Statement Loans

Bank statement loans are technically not no-income loans. However, they allow lenders to verify your income using alternative underwriting methods. Instead of providing your lender with W-2s, pay stubs, and tax returns, you can give them 12 to 24 months’ worth of bank statements to help them determine whether the deposits in your account are enough to pay your mortgage.

Lenders will not use your tax returns to determine your loan eligibility or amounts when you apply for a bank statement loan. However, since many self-employed borrowers and investors take tax deductions, lenders recognize that your tax returns don’t accurately reflect how much you earn.

In addition to having sufficient income to repay your mortgage, bank statement loans typically require a minimum credit score and a down payment of at least 10%. Exact requirements vary by lender, but you’ll have to prove that you’ve been self-employed for at least two years. Additionally, these loans may come with higher interest rates and down payment requirements than some other types of home loans.

DSCR Loans

Think of debt service coverage (DSCR) loans as the modern version of the NINA loan for investors. These mortgages make it possible for you to qualify for a loan with no income verification. Instead of qualifying for an investment property loan based on your income or assets, lenders will determine your eligibility based on the property’s projected cash flow — or rental income.

DSCR mortgages are another type of Non-QM loan that helps lenders easily determine a borrower’s ability to repay. The debt service coverage ratio tells lenders whether a property generates enough rental income to allow the borrower to repay the loan. Most lenders like to see a DSCR of at least 1.25 to ensure the borrower can repay their debt and still have some rental income left over for other expenses. However, Griffin Funding allows DSCRs as low as 0.75.

The debt service coverage ratio formula compares the property’s gross rental income to its mortgage debt, including principal, interest, taxes, and insurance. Lenders use this figure to determine if the property’s generated income can support the loan without taking into account other factors like management, maintenance, and utility costs.

DSCR loans are only available for real estate investors; they can’t be used to purchase a primary residence. However, they can be used for both long-term and short-term rentals and various types of properties, from condos to single-family homes and apartment complexes.

NINA Mortgage Alternatives

NINA loans no longer exist for homebuyers, but there are several alternative loan programs available that allow you to qualify based on factors like assets rather than personal income. For instance, if you’re currently unemployed but have a high net worth, you may still qualify for other no-income loans, such as:

Asset-Based Loans

Asset-based loans are similar to NINA mortgage loans because they don’t require income verification. However, unlike NINA loans, they do require asset verification. With these loans, you use your assets as income which can then be used to qualify for a mortgage loan. Additionally, asset-based lending can be used to purchase primary residences, second homes, and investment properties.

Like bank statement loans, these mortgage programs are ideal for individuals who can’t provide the required income verification documents associated with conventional loans. By qualifying based on assets, borrowers don’t have to provide proof of employment or income since their ability to repay the loan is determined solely by liquid assets, such as:

• Bank accounts
• Certificates of deposit
• Investment accounts
• Money market accounts

The borrower’s debt-to-income (DTI) ratio is usually not calculated, but the main drawback of these loans is that most lenders typically require a down payment of 20%.

VA Streamline Refinance Loan

If you purchased your home with a VA loan, your lender verified your income to ensure you could afford your mortgage. However, if you use a VA streamline refinance loan to reduce your interest rate and monthly payments, you won’t have to provide your income information again. Instead, your new loan will replace your old VA loan to give you better terms that reduce your monthly payments.

With a VA streamline refinance loan, you can choose to start over with a new 30-year fixed mortgage or customize your loan terms. However, to qualify for a VA refinance loan, your current loan must be a VA loan.

VA streamline refinance loans don’t require income verification because your income was already verified for the VA loan. Additionally, you won’t be required to have a second appraisal or provide us with your certificate of eligibility (COE) again.

Griffin Funding specializes in a variety of mortgage types to ensure you find the right option based on your needs and budget. If you’re an investor, you can inquire with us about the various investment property loans we offer. Meanwhile, if you’re looking for a loan for an owner-occupied property, you can review our website for our available loan offerings in your state.

See If You Qualify for a No-Income, No-Asset Loan

If you don’t qualify for a conventional loan with strict lending requirements, a no-income loan similar to a NINA loan might be right for you. While NINA loans are currently only available for investors, borrowers looking to purchase a primary residence still have many options, such as bank statements and asset-based loans.

Wondering which option is right for you? Talk to a Griffin Funding mortgage specialist today to learn about our mortgage programs and find one that aligns with your needs. Apply now.

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As you may know, it’s more challenging for entrepreneurs, investors, small business owners, and freelancers to secure a home loan because traditional mortgages come with stringent lending criteria. For instance, these individuals take deductions on their tax returns that reduce their taxable income, and they may have seasonal income that can affect their eligibility.

That said, many mortgage lenders understand that just because borrowers don’t meet traditional home loan criteria doesn’t mean they can’t pay off their loans, creating more loan options for individuals that don’t qualify for traditional loans.

For example, stated income loans were created to allow individuals to apply for a home loan without providing documentation. Instead, they simply stated their income, and their words were taken at face value. But what is a stated income loan, and do they still exist? Keep reading to learn more about these loans to help you find the best option for you and your family.

What Are Stated Income Loans?

Stated income loans were originally a type of mortgage loan that allowed borrowers to qualify without income verification or documentation. Instead of providing tax returns or pay stubs, borrowers declare — or state — their income on the application, and lenders take their word for it instead of requiring verification through documentation like pay stubs or W2s.

Getting a loan with stated income is still an option today, but lenders must do their due diligence to ensure a borrower can afford to repay the loan. Applicants can no longer state their income on an application without providing some form of proof. Instead of using traditional methods, lenders verify your income using alternative methods, making it a good option for borrowers who may not qualify for traditional home loans, such as:

• Self-employed individuals and freelancers
• Entrepreneurs
• Retirees
• Small business owners

How Do Stated Income Loans Work?

Stated income mortgage loans work much like other mortgage loans. However, borrowers can no longer simply state their income. As of 2010, borrowers must provide proof of income through bank statements, tax returns, or other financial documents to prove their ability to repay the loan.

Stated income home loans improve the chances of borrowers getting approved for home loans because they don’t verify income with tax returns or pay stubs. Instead, they may use bank statements and look at the income deposited over a period of 12 or 24 months to determine how much a borrower actually earns. Then, the lender takes into account other factors like a borrower’s debts and credit score to evaluate their ability to repay the loan.

Stated Income Loans vs Traditional Mortgages

Stated income loans are Non-QM loans that require borrowers to state and prove their income, just like any other home loan. However, unlike traditional mortgages, the methods for verifying a borrower’s income are more flexible. For example, instead of relying on pay stubs, tax returns, and W2s, underwriters can use bank statements and other types of financial documents to verify someone’s income.

These loans can be beneficial for individuals who don’t have the necessary documentation to apply for a traditional loan. For example, self-employed individuals work for themselves and don’t have W2s or pay stubs. Additionally, small business owners take deductions on their tax returns, which effectively reduce their taxable income used as a determining factor for loan approval.

To help you understand, let’s say you’re a self-employed graphic designer who works for a variety of different clients. You earn $100,000 per year but deduct $40,000, making your taxable income only $60,000. Reducing your taxable income makes it so you owe less in taxes, helping you save money. However, traditional lenders verify your income by looking at your adjusted gross income after deductions, which is $60,000. So, ultimately, the tax return doesn’t accurately reflect a borrower’s ability to repay the loan. In reality, this borrower earns much more per year and may have a hefty savings account the lender doesn’t know about.

Depending on other factors, such as the borrower’s debt-to-income (DTI) ratio and credit score, they may not be eligible for a traditional home loan based on the information we have in front of us. However, they may still be eligible for a stated income loan because they can prove their income with bank statements rather than tax returns.

Of course, there are several other differences between today’s stated income loans and traditional mortgages, including:

• Interest rates: Non-QM loans, like stated income loans, typically have higher interest rates. While they’re less risky for the lender and borrower now than they used to be, they still carry more risk than conventional loans.
• Accessibility: These loans are not widely available and can be difficult to find as not all lenders or banks offer them.
• Down payment requirements: Since these loans are considered riskier for the lender, they may require you to put down a larger down payment. However, down payment requirements vary by lender. For example, Griffin Funding allows down payments as low as 10% for many Non-QM loan types.

History of Stated Income Loans

In the 2000s, mortgage lending requirements were much looser, allowing for easy access to no income verification mortgages. Stated income mortgage loans became popular because they allowed borrowers to qualify without income verification while allowing lenders to service more loans quickly to sell on the secondary mortgage market. Unfortunately, this led to unqualified borrowers receiving home loans only to default on them because they couldn’t actually afford them.

Stated income loans today are much different from the ones before the 2008 housing market crash. Back then, these loans were risky because they didn’t verify the borrower’s income at all. As a result, a borrower who wanted to buy a house with low income could list a higher income than they actually made, allowing them to get the loan but leaving them unable to pay their mortgage.

Following the recession, which was partially fueled by an overabundance of stated income loans, banks stopped offering them. Remember, the goal of a lender is to make money by servicing your loan. Therefore, they don’t want borrowers to go bankrupt or stop paying their loans.

However, stated income home loans resulted in many people around the nation being unable to repay their mortgages because lenders didn’t verify crucial information.

To remedy this issue, the government passed the Dodd-Frank Act in 2010, which set stricter criteria for these types of loans. The new loans are called qualified mortgage (QM) loans and consist of traditional mortgages that require the lender to verify the borrower’s ability to repay with W2s and 1099s if self-employed. Unfortunately, these new criteria made it more challenging for people who could repay their loans to become eligible for a loan.

Many borrowers don’t qualify under the Dodd-Frank guidelines because they can’t document their income as required. As a result, even if a borrower can repay the loan, they won’t qualify because they don’t have the necessary paperwork or because they reduce their taxable income with deductions on their tax returns.

Luckily, we have Non-QM loans to help borrowers of all types secure a home loan. Under the Dodd-Frank act, lenders must still verify a borrower’s ability to repay. Today’s stated income home loans are much different, but they reduce the possibility of borrowers defaulting on their loans while allowing for alternative underwriting methods to verify the ability to repay the loan.

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Can You Still Get Stated Income Loans?

True stated income home loans that don’t verify a borrower’s ability to repay the loan no longer exist. However, stated income loans still exist under several different names. Unlike their predecessor, today’s stated income loans require lenders to determine a borrower’s ability to repay by verifying their income, DTI, and credit history.

Simply put, stated income loans in the traditional sense don’t exist. While borrowers must still state their income on a mortgage application, lenders must verify any information provided to ensure a borrower can afford the loan.

Alternatives to Stated Income Loans

Stated income loans have taken a new form, but they’re still available for borrowers with alternative income documentation. Today’s loans with stated income verification have more flexible lending requirements than conventional mortgages, enabling individuals without W2s or tax returns that accurately reflect their income to secure a home loan. A few alternatives to stated income loans that are popular today and offered as adjustable- or fixed-rate mortgages include:

Bank Statement Loans

Bank statement loans are a popular stated income loan alternative ideal for small business owners, self-employed individuals, and freelancers who take significant deductions on their tax returns and don’t have W2s. These loans typically require 12 to 24 months’ worth of bank statements instead of pay stubs to ensure borrowers have high enough monthly deposits.

With these types of mortgage loans, your lender will use bank statements to prove your ability to repay the loan. Additionally, you can use bank statement home equity loans if you need a second mortgage, even if your first mortgage isn’t a bank statement loan.

With these loans, you’ll still need to provide financial documentation of your income, but lenders will have a more accurate and complete picture of your financial situation to determine your eligibility. If you have personal and business bank accounts, you’ll have to provide statements for both to ensure you have enough money to cover the down payment and pay your monthly mortgage premium. In addition, lenders will want to know more about your particular situation. For instance, if you’re a small business owner, they’ll want to know about the number of your employees, the location of the business, and expenses.

Asset-Based Loans

Asset-based loans, also known as asset depletion mortgages,  allow you to qualify for a home loan by using your assets as income to determine your ability to repay the loan. These loans are ideal for retirees, business owners, freelancers, and individuals with significant assets, even if they have a small fixed income. 

With asset-based loans, you borrow against your assets, with the loan amount being determined by a percentage of their value. Lenders allow you to use 100% of your liquid assets and up to 70% of your retirement and investment accounts when applying for an asset-based loan.

These types of loans allow you to qualify for a home loan based on the assets you already have, such as your bank accounts and investment portfolios, so your current income isn’t a significant factor, although it can help. Asset-based mortgages are best suited for individuals with significant verifiable assets that don’t qualify for a traditional home loan based on their current financial situation. Assets can include things like:

• Checking and savings accounts
• Certificates of deposit (CDs)
• Money market accounts and mutual funds
• Stocks and bonds

DSCR No Income Mortgage

Debt service coverage ratio (DSCR) mortgage loans are designed for investors as a type of no income mortgage that allow individuals to purchase rental properties like single-family homes, condos, and apartments. With these loans, a lender determines if the income loan property (the rental property) can generate enough income to pay for the loan. To apply for these loans, borrowers must include estimates of projected rental income to be verified by the lender instead of using tax returns. With these loans, investors can avoid lengthy approval processes and strict lending criteria associated with conventional loans.

With these investment property loans, a lender determines if the income loan property (the rental property) can generate enough income to pay for the loan. To apply for these loans, borrowers must include estimates of projected rental income to be verified by the lender instead of using tax returns. With these loans, investors can avoid lengthy approval processes and strict lending criteria associated with conventional loans.

DSCR loans are a type of mortgage for investors only. You can’t use them to purchase a primary residence. Instead of traditional income verification, lenders calculate a borrower’s debt service coverage ratio to verify their ability to repay the loan.

The DSCR is calculated by dividing the property’s annual gross rental income by its annual debt (the mortgage and other costs like insurance), giving you a ratio. For example, if you have a gross rental income of $250,000 and an annual debt of $200,000, your DSCR is 1.25.

A ratio above 1.0 verifies that a borrower earns enough rental income to cover the mortgage. Lenders like to see a ratio of at least 1.25 to ensure the borrower can pay their mortgage and cover any expenses associated with the property, such as repairs or maintenance. However, some lenders allow DSCRs as low as 0.75, which typically comes with higher interest rates.

In any case, DSCR loans allow investors to qualify for mortgage loans based on the income loan property’s projected cash flow or rental income. These loans are ideal for both seasoned and novice investors who want to qualify for a loan based on the cash flow of the property rather than personal income, which may not accurately reflect how much they earn.

Tips for Securing Loans Similar to Stated Income Mortgages

There’s essentially no such thing as a stated income mortgage anymore because lenders are required to verify your income to determine your eligibility. However, there are many options available for borrowers who aren’t eligible for traditional loans. Non-QM loans make it easy for individuals who don’t qualify for traditional loans to secure a mortgage. However, you still must provide documentation to prove your ability to repay the loan. Here are a few tips to secure a mortgage similar to a stated income loan:

Prove income stability

To qualify for any type of home loan, you need to prove income stability. This doesn’t mean you can’t get a loan if you have seasonal income, but it does mean that you must earn enough or have enough in assets to cover your monthly mortgage payments. To prove income stability, you’ll need to share financial documents with your mortgage lender.

Lenders typically request the following documents to verify income: 

• Personal and business bank statements from the past 12-24 months
• Tax returns and business profit & loss statements
• Documentation of any recurring payments or retainer agreements
• Proof of consistent client relationships or contracts
• Business licenses and incorporation documents
• Recent invoices to payment receipts from clients

Even if your income changes drastically from month to month, your lender will be able to determine if you earn enough annually to qualify for the loan. It’s important to note that even if you’re providing 12 months of bank statements, your lender may still require you to prove that you’ve been self-employed for a period of at least two years. If you haven’t been, some lenders may be more lenient if you’ve stayed within the same industry performing the same job function.

In addition to proving income security, you’ll have to provide information about your employment status or business.

For example, if you’re self-employed, you’ll explain the industry you’re in and what type of work you do. In this case, a freelance graphic designer will share information about the types of clients they work with, how they’re paid and whether they’re on retainer, and prove that their source of income is reliable. Meanwhile, a small business owner may provide documentation about the number of customers and employees they have.

Review your debt-to-income ratio

Your debt-to-income (DTI) ratio reflects the percentage of your income that’s used to pay off your current debt. It’s calculated by dividing your monthly debt by your monthly gross income and multiplying that figure by 100 to give you a percentage.

For example, if your monthly debt equals $2,000 and your monthly income is $6,000, you have a DTI ratio of 33%. Most traditional lenders like to see a DTI of 43%. However, every lender is different. For example, Griffin Funding allows for DTIs as high as 55%. However, a higher DTI can impact your eligibility and loan amount.

Monitor your credit score

In addition to your income and DTI, your credit score is an important determining factor and can help lenders determine how you handle debt. A high credit score tells lenders that you’re a borrower who pays back their debts on time, while a low credit score indicates that you have difficulty managing your debts. Your credit score reflects your creditworthiness, indicating to lenders the likelihood that you’ll repay your loan.

The minimum credit score to qualify for a home loan varies by lender, but you should aim for good or better. The higher your credit score, the better terms you can get. For example, a higher credit score can reduce your interest rate, saving you money over the life of the loan.

In addition to this number, lenders will review your credit history and all the components that make up your score. Key factors they evaluate include:

• Number and types of credit accounts (credit cards, personal loans, student loans, etc.)
• Total amounts owed across all accounts
• Length of credit history and age of accounts
• Payment history and on-time payment record
• Recent credit inquiries and new account openings
• Credit utilization ratio (amount of available credit currently in use)

This information can help lenders understand your borrowing and spending habits while ensuring you have a history of making on-time payments. 

Separate business accounts

When applying for a Non-QM loan with bank statements, you must provide your personal and business bank statements. It usually makes it easier for lenders to sift through your information by separating business from personal expenses to ensure you can repay your debts. When reviewing bank statements, lenders will ensure that you earn enough every month to cover your mortgage payments, have regular monthly deposits to ensure income stability, and have enough money to cover the down payment and closing costs.

Explore Stated Income Loan Alternatives

True stated income loans no longer exist, but several alternatives exist for individuals who don’t qualify for a traditional home loan. Today, many lenders still call them stated income loans. However, they’re actually alternatives to the original stated income loan because lenders must verify a borrower’s ability to repay the loan.

These loans are a good option for individuals who take substantial deductions on their tax returns or don’t qualify for traditional loans because of strict lending criteria. Wondering if Non-QM loans are right for you? Contact Griffin Funding today or download the Griffin Gold app to learn more about our loan programs and find the best option based on your financial situation.

The post Stated Income Loans: Definition, Background, & Alternatives appeared first on Griffin Funding.

Unfortunately, ignoring the information on your mortgage statement can be a mistake. This piece of paper tells you about more than just your current balance. Reading your statement can provide you with essential information about your loan, including how quickly you’re paying it off.

Reviewing your mortgage statement can tell you when there’s been a change in your mortgage servicer and allow you to check for mistakes that can impact your financial health. So what is a mortgage statement, and why should you read it? Keep reading to learn more about home mortgage statements and how to understand the information on yours.

What Is a Mortgage Statement?

A mortgage statement is a document your lender provides that contains details about the loan, including payments. Like any other type of bill, you’ll receive a monthly mortgage statement with current details about your loan, such as your balance, interest rates, and payment breakdown. In addition, some lenders may provide additional information, such as recent payment history. However, mortgage statements typically contain the same information regardless of lender.

Mortgage Statement Breakdown

So what does a mortgage loan statement look like? All mortgage statements are required to include the same basic information and be formatted similarly. According to the Consumer Financial Protection Bureau (CFPB), all mortgage statements must include essential information about the loan and lender. Therefore, your statement will look the same if you have a conventional, Non-QM, VA, FHA loan, or any other type of home loan. Here are some crucial pieces of information you can find in your statement:

Mortgage servicer contact information

Your mortgage servicer is subject to change as mortgages are frequently sold on the secondary mortgage market. Knowing who your lender is can help you understand who to contact if there’s a problem with your statement or you need information from them. The home mortgage statement will include your lender’s name, phone number, address, and website.

Account number

Your mortgage loan is tied to an account number your lender needs if you ever contact them about your mortgage. Of course, there are other ways for them to identify you as a borrower, but providing your account number is the easiest and can help you get in touch with someone who can answer your questions much faster.

Amount due

The amount due is the full payment due on the due date stated on your mortgage statement. This total includes principal, interest, escrow, and associated fees. Mortgages are similar to rent and many other bills due on the first of the month, but your lender may give you a grace period of up to two weeks past the due date before issuing a late fee.

Due date

Near the amount due, you’ll see the due date for the payment, and many lenders may provide a late payment date with another figure that tells you when you’ll be charged a late fee and how much that late fee will add to your balance. Pay your mortgage on time every month to avoid hefty late fees that make your loan more expensive.

Outstanding amount

The outstanding principal amount is the amount you still owe on your mortgage. Every payment you make reduces your principal balance, so you should see this number decrease monthly.

Interest rate

Your interest rate is based on the mortgage rate you locked in during the loan approval process and depends on whether you have an adjustable vs fixed-rate mortgage. If you have a fixed-rate mortgage, the interest rate will be the same every month. However, if you have an adjustable-rate mortgage (ARM), you should pay close attention to your interest rate because it is subject to change. Your loan servicer will notify you of any interest rate changes, but it’s still essential to pay attention to it on your mortgage loan statement since it can drastically affect the cost of your monthly bill.

Past payment and transaction activity

Past payment and transaction history can help you see how last month’s payment was applied to the loan and help you track how much money you’ve spent on each part of your mortgage. It can also ensure you’ve continued to pay in full every month and haven’t missed any payments.

Escrow balance

If you have an escrow account, your lender may include its balance on your mortgage statement to help you determine whether you need to add more money. Lenders typically require an escrow account when they’ll be paying property taxes and homeowners insurance on your behalf, so if it doesn’t contain enough money, you may fall behind on your bills.

Delinquency notice

If you’re more than 45 days late on your payment, your next mortgage loan statement might include a delinquency notice, meaning you must pay your bill as soon as possible. If you don’t pay your mortgage after 120 days, the lender can begin foreclosure. If, for any reason, you can’t pay your mortgage on time, it’s crucial to talk to your lender as soon as possible.

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The Importance of Reading Your Statements

Many people treat their mortgage statements much like their bank statements; they may open them but never get around to actually reading them and ultimately toss them in the trash. However, it’s crucial to read your mortgage statement every month because it can provide you with important information about your loan and help you catch errors or mistakes when they occur. So why should you read your monthly mortgage statement? Here are a few reasons:

• To plan for interest rate increases: If you have an ARM, your interest rate will change throughout the life of your loan. Your lender is required to send you a notice in the mail about any interest rate changes and how they’ll affect your monthly payments. However, it’s crucial to continue checking your mortgage statement’s interest rate to prepare for increases that can affect your budget.
• To shop for new insurance: If you have a fixed-rate mortgage, very few factors can contribute to an increase in your monthly payment. However, your amount due might increase if your homeowner’s insurance costs have increased. Reviewing your mortgage statement can help you catch any cost increases that ultimately affect how much you pay for your home. If they get too high, you can shop for a new homeowners insurance provider.
• A new loan servicer: Mortgage loans are frequently sold to other companies, and reading your mortgage statement can help you determine where your money is going when you make a payment. Your loan changing servicers won’t affect your balance or any other aspect of your loan. However, you’ll need to change who you send your payment to every month. Apart from the change in servicer information on the mortgage statement, you’ll receive a notice in the mail telling you that your loan servicer has changed and where to send your payments. Additionally, there is a grace period for sending payments if you accidentally send them to your old servicer instead of the new one. If you send it to the wrong servicer, they may forward it to the correct company or send it back with another notice about your loan servicer changing.
• Mistakes: Every month, you should review your balance, interest, escrow payments, and fees. Your outstanding principal balance should decrease every month because you’re paying off the loan. Unfortunately, mortgage loan servicers can make mistakes, so checking your mortgage statement can help you catch clerical errors before they become significant problems.

How long should I keep my mortgage statements for?

Having your mortgage statements on hand can help you determine how quickly you’re paying off your loan and ensure you have the proper documentation in case there’s ever a mistake or misunderstanding between you and your lender. However, after reviewing your mortgage statement and checking it for accuracy, you can typically shred it once you receive a new one since it will be more up-to-date.

Since the information on monthly mortgage statements changes monthly, you typically don’t need this information throughout the entire life of the loan, but it’s a good thing to have on hand in case you need to make a dispute. In addition to your monthly mortgage statements, you’ll receive an annual mortgage loan statement from your lender that will provide you with more documentation on your interest rate, loan term, outstanding balance, insurance paid on your behalf, and late payments. As long as your monthly mortgage statements are accurate, you can choose to keep only the annual statements.

Stay on Top of Your Mortgage Statement

Reading your monthly mortgage statement to check for accuracy can help you plan your budget and catch errors before they become significant problems. Most mortgage bills are due at the beginning of the month, but there’s usually a 15-day grace period before lenders will consider it late. If you haven’t already, you should set up automatic payments with your loan servicer to ensure you pay your mortgage bill on time every month.

However, even if you pay automatically, you should continue to read your mortgage statement to check for accuracy, review your interest rate, learn when your loan servicer has changed, and avoid costly late fees. Griffin Funding can help you stay on top of your mortgage statement and bills by allowing you to make monthly payments via mail, phone, or direct deposit. Our mission is to serve our customers, so if you have any questions about your mortgage statement, contact us immediately.

Ready to become a homeowner? We offer several types of home loans for any type of borrower. Learn more about our Non-QM and conventional mortgages or apply with Griffin Funding today.

Article References

1. “The Federal Register.” Federal Register: Request Access, https://www.federalregister.gov/documents/2018/03/12/2018-04823/mortgage-servicing-rules-under-the-truth-in-lending-act-regulation-z.

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Bank statements are documents that list all of your banking activity, including your balance and amounts deposited and withdrawn. Lenders often use bank statements to verify income and ensure you have enough saved for the down payment and closing costs to ensure you can afford the loan.

So how many months of bank statements do you need for a mortgage? Ultimately, it depends on the type of loan you’re applying for. If your lender will require bank statements with a traditional loan, you usually only need to provide two or three.

However, there are particular home loans that allow you to qualify using bank statements called bank statement loans. If you use one of these Non-QM mortgage loan options, your lender will determine your eligibility and loan amount directly from your bank statements. Bank statement loans typically require at least 12 months’ worth of bank statements, but the exact amount varies by lender.

Keep reading to learn more about bank statement loans and other types of mortgages that might require bank statements to determine how many months of bank statements you need for a mortgage.

What Is a Bank Statement Loan?

A bank statement loan is a type of non-qualified mortgage (Non-QM) loan that can help borrowers qualify for a home loan with bank statements instead of traditional methods like tax returns, pay stubs, and W2s. With a bank statement loan, the lender verifies your income using only bank statements rather than utilizing conventional income verification methods.

Bank statement loans are ideal for individuals who don’t have traditional income. These borrowers don’t have W2s or pay stubs because they’re self-employed, retired, or business owners who don’t have employers. Additionally, business owners, entrepreneurs, and self-employed individuals usually take legal deductions on their tax returns that effectively reduce their adjusted gross income — an important qualifying factor for a home loan. Therefore, their tax returns don’t paint an accurate picture of their financial situation.

Many borrowers are denied traditional home loans because their tax returns don’t accurately reflect their income. Additionally, they don’t have traditional documentation like regular employees to help lenders verify their income. A solution to this issue is a bank statement loan.

How Do Bank Statement Loans Work?

With bank statement loans, lenders require borrowers to provide a certain number of bank statements to demonstrate their income and ability to repay the loan. When lenders look at your bank statements, they’ll review the total amount of deposits and divide that amount by the number of bank statements.

In some cases, you might be able to use bank statements, tax returns, and W2s to qualify for a loan. This is usually the case with co-borrowers in which one has a W2 job, and the other is self-employed, retired, or a business owner. Ultimately, bank statement loans allow you to qualify primarily based on the income demonstrated in bank statements. However, lenders may use any number of sources to qualify your income. The same is true for other types of loans, such as asset-based loans and conventional loans. If you have a co-borrower, discuss your options with a lender to determine whether bank statement loans are right for you based on your unique situation.

The main goal of a bank statement loan is to verify a borrower’s income before approving them for a home loan. Lenders must do their due diligence to ensure you can repay the mortgage loan. With bank statement loans, lenders use bank statements instead of W2s and tax returns to verify your income, allowing them to streamline the process because there’s less paperwork required.

Bank statement loans work similarly to other types of home loans. Apart from verifying your income, the lender will want to learn more about your complete financial situation by reviewing your credit history to calculate your debt-to-income (DTI) ratio and employment history, whether or not you’re self-employed, retired, a business owner, or a gig worker.

How Many Months of Bank Statements Are Needed for a Mortgage?

How many months of bank statements are needed for a mortgage? It depends on the loan. If your lender wants to use bank statements to verify your income for a traditional home loan, they’ll usually only require two to three months’ worth. However, if you’re applying for a bank statement loan in which the lender uses your bank statements to verify your income, you’ll need to provide more.

If you do apply for a bank statement loan, most lenders require anywhere from 12 to 24 months’ worth of bank statements. This will help them determine your cash flow and ensure you have enough money saved for a down payment, closing costs, and a steady stream of income to pay your monthly mortgage premium.

You can use both personal and business bank statements to demonstrate your income and ability to repay. However, every lender is different, so you may be required to provide both. In any case, lenders like to see that you have bank statements going back at least 12 months to ensure you have a steady, reliable income.

Other Bank Statement Loan Requirements

A bank statement mortgage loan makes qualifying for a home loan easier for individuals without traditional income sources. Like other types of mortgage loans, lenders have requirements you must meet to be eligible. These requirements can also impact your total loan amount. Apart from verifying your income, lenders will want to learn more about you and your financial situation. Other bank statement mortgage requirements include:

Employment

All mortgage loans have some type of employment requirement to ensure you have a reliable source of income to repay the loan. However, not everyone is a W2 employee. Many people are contractors, business owners, freelancers, and retirees with alternative sources of income. For example, a freelance graphic designer doesn’t receive W2s or pay stubs from their clients. Instead, they’ll receive a 1099 and report their income on their taxes.

Even if you don’t have a traditional job in which you work for an employer, you still have an employment history and a source of income. You don’t need to be a W2 employee to qualify for a bank statement loan. Instead, you just need to prove that you can earn an income every month to repay your mortgage.

Since many self-employed individuals apply for bank statement mortgage loans, they typically just have to prove that they’ve been self-employed for at least two years. However, employment requirements vary by lender. For example, some may be willing to work with you if you’ve recently become self-employed and can prove that you have a reliable stream of income. Meanwhile, other lenders may allow you to be self-employed for fewer than two years if you’ve stayed within the same industry and your job duties haven’t changed much.

Small business owners can usually provide a business license or website address to confirm that they’ve been self-employed for the required period.

Credit History

Lenders review your credit history to determine whether you’re a trustworthy borrower. They like to see that you’re someone who pays their debts on time and doesn’t take on more debt than they can afford. Additionally, your lender will review your open accounts to help calculate your DTI ratio to determine whether you can afford to repay the loan based on your income compared to your current bills.

Lenders like to see a credit score of around 620 or higher to ensure that you have good financial habits. However, some lenders may be willing to accept lower credit scores. In any case, it’s always best to increase your credit score as much as possible before applying for a home loan because it can impact your interest rate. The higher your credit score, the lower your interest rate, which can save you thousands of dollars over the life of the loan.

Down Payment

Believe it or not, your credit score can also impact the down payment requirement. Most bank statement mortgage loans require a down payment of at least 10%. However, some lenders have a tiered process for determining down payment based on credit score. For example, at Griffin Funding, a credit score of 700 or higher allows you to make a down payment as low as 10%. However, a credit score that falls below 700 may require a larger down payment.

Reserves

Bank statement loans are considered a higher risk for the lender because borrowers aren’t W2 employees. Since they’re using alternative methods to verify income, they take on more risk. However, lenders mitigate their risk in several ways by passing it on to the borrower. For instance, the lower your credit score, the higher your down payment will be. In addition, many lenders require you to have reserves in the bank to ensure you can repay the loan regardless of any changes to your employment situation.

Griffin Funding requires at least three months of reserves after making your down payment and paying closing costs to cover the principal, interest, taxes, and insurance (PITI) costs associated with the loan. This requirement varies by lender, so you should always understand the requirements before applying for the loan.

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Benefits of Bank Statement Mortgage Loans

Bank statement mortgages are designed for borrowers who can’t prove their income with traditional underwriting methods. These individuals simply don’t have the necessary documentation because they’re self-employed, retired business owners who don’t have an employer to provide W2s and pay stubs.

The most significant advantage of these loans is that they allow more borrowers to qualify for a home loan. Many self-employed individuals don’t qualify for traditional home loans because they can’t provide proof of income through traditional methods. However, bank statement loans make it possible for borrowers of all types to qualify based on bank statements. Other benefits of bank statement mortgage loans include:

Streamlined Application Process

Bank statement loans require fewer financial documents because your eligibility and loan amount are based on the deposits in your bank accounts. Compared to the conventional loan process that may require bank statements, W2s, tax returns, and pay stubs, bank statement loans offer a more streamlined process, allowing you to close on a house faster.

High Loan Limits

Bank statement mortgage loan limits vary by lender, but they offer more flexibility than conventional loans because they’re not regulated by Fannie Mae and Freddie Mac’s guidelines. Therefore, lenders can choose their own maximum loan amounts as long as the borrower can prove their ability to repay the loan. For example, Griffin Funding’s bank statement loans have a minimum loan amount of $100,000 and a maximum of $5 million.

Higher DTI Ratios Accepted

Since lenders aren’t restricted to Fannie Mae and Freddie Mac guidelines, they can accept higher DTI ratios. However, this requirement varies by lender. For conventional loans, most lenders accept DTIs no higher than 43%. However, Griffin Funding allows DTIs as high as 55% for some borrowers and loan types.

To find your DTI ratio, divide your monthly income by your monthly debts and multiply that number by 100 to give you a percentage.

Type of Property

Conventional loans have restrictions on the types of properties you can purchase. For example, VA loans can only be used to purchase a primary residence. However, bank statement loans allow for more flexibility, giving you the ability to purchase primary residences, vacation homes, or rental properties.

Adjustable and Fixed-Rate Options

With bank statement loans, you can choose between an adjustable- or fixed-rate mortgage, allowing you to take control of your mortgage payments. Adjustable rate mortgages (ARMs) are ideal for individuals who want to pay less now. However, it’s important to note that rate changes depend on the market, so you could end up paying more for your loan.

Downsides of Bank Statement Mortgage Loans

Unfortunately, no loan is perfect for everyone. Bank statement loans are best for individuals who don’t have traditional methods of verifying their income. There are several situations where another type of loan might be a better option. Potential downsides of bank statement mortgage loans for borrowers include:

Employment Requirement

To obtain a bank statement mortgage loan, borrowers must meet the lender’s employment criteria. This usually means operating a business or working as a self-employed individual for at least two years. However, some lenders may be willing to accept self-employment of fewer than two years, depending on the circumstance.

Unfortunately, if you’ve recently become self-employed, you’re a bigger risk to lenders and likely don’t have a method to verify income. Remember our earlier question, “How many months of bank statements for a mortgage do you need?” Lenders want at least 12 months’ worth of bank statements for bank statement loans to verify your income. If you can’t provide that crucial documentation, you won’t qualify.

Interest Rates

Bank statement mortgages typically have higher interest rates than traditional loans. However, you can reduce your interest rate by making a larger down payment and increasing your credit score before applying for the loan.

Accessibility

Not all lenders offer bank statement loans, so you’ll need to research mortgage lenders in your area and their offerings to ensure you find the best option based on your financial situation. Additionally, even if there are several lenders in your area that offer bank statement mortgages, you should shop around to find the best rates and work with a mortgage lender you can trust. This is especially crucial if you’re looking for loans for first-time buyers because the process can seem overwhelming without a mortgage lender that’s willing to work closely with you throughout the process.

How to Get a Bank Statement Loan

Getting a bank statement loan is similar to any other type of mortgage. After getting preapproved and putting an offer in on a home, you can apply for a mortgage. To apply with Griffin Funding, we need at least 12 to 24 months of bank statements from your personal and business accounts to verify your income.

Your application will go through a manual underwriting process to verify all the information you’ve given us about your employment situation, income and assets, and debt to determine your eligibility, loan amount, and interest rate. During the underwriting process, we may need more information, so you must remain in communication with us to streamline the process.

Apply for a Bank Statement Loan Today

Qualify for a home loan with bank statements by applying with Griffin Funding today. Our mortgage specialists can walk you through the application process to ensure you understand bank statement loans and have all the necessary documentation for us to begin the underwriting process.

Don’t qualify for a bank statement loan? We offer a range of mortgage loan options to help you find the best option for you and your family. Contact us today to learn more about the types of loans we offer.

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