Bank Statement Home Equity Loans (HELOANs)

• What Is a Second Mortgage?
• Pros and Cons of Bank Statement Home Equity Loans
• Bank Statement Home Equity Loan Requirements
• Applying for a Bank Statement Home Equity Loan

A second mortgage is when you take out a second loan against your property. You must have a first mortgage loan on your property to get a second mortgage. When you take out a second loan, there is a lien taken out against the portion of your home that has already been paid off. However, second loans allow you to access more funds based on your home’s built-up equity.

Taking out a stand-alone second mortgage loan gives you access to more cash by using the property as collateral. With your first mortgage, you had to use the loan to pay for the home. However, your second mortgage allows you to cash in on your equity and use loan funds for all types of purchases.

Homeowners can use second mortgages to:

• Finance large purchases such as a new vehicle, a vacation home, or an investment property
• Consolidate debt
• Pay for their child’s college education
• Renovate their homes
• Start or expand a business

Using a home equity loan to make home improvements and upgrades to your home can help increase the property’s value and make the home more enjoyable to live in.

Tappable equity is at an all-time high. In 2023, American homeowners were sitting on nearly $30 trillion in tappable home equity, which equals out to about $200,000 in tappable cash per homeowner. This represents a huge economic opportunity for homeowners in the U.S., as that tappable equity can be used to consolidate existing high interest debt, fund home improvement projects, and cover other major expenses — you can even use funds from a HELOAN to make a down payment on a new investment property.

At the end of the day, a HELOAN can help you turn your house’s equity into cash without touching your low-rate first mortgage.

Bank statement home equity loans are non-QM mortgages with expanded criteria that allow borrowers to prove their ability to repay using bank statements rather than traditional income verification methods, which require borrowers to provide proof of income via pay stubs or W-2s. Through a bank statement HELOAN, you can secure a home equity loan without income.

Bank statement loans are similar to stated income loans or no doc loans and come in fixed-rate or adjustable-rate varieties. However, they’re ideal for borrowers who can’t provide proof of income with tax returns, W-2s, or pay stubs, such as:

• Self-employed borrowers
• Freelancers
• Investors
• Retirees 

Overall, bank statement mortgages can serve as home equity loan for self-employed individuals who want to tap into their equity. This type of financing can also be a great option for those who take deductions on their taxes, ultimately reducing their net income. These individuals have a lower net income but still have the ability to repay, which isn’t taken into account with traditional mortgages.

If you don’t qualify for a second mortgage bank statement loan, other options are available, depending on your financial situation. For example, Griffin Funding offers traditional home equity loans and home equity lines of credit. We also have a range of non-QM loan options available, including:

• DSCR loans: Qualify for investment property financing using the property’s projected rental income rather than personal income.
• Asset-based loans: Also known as an asset-depletion mortgage, asset- based loans allow you to qualify for a home loan using liquid assets such checking, savings, and investment accounts.
• Foreign national loans: If you’re a foreign national or immigrant, you can qualify for a mortgage using your Individual Taxpayer Identification Number (ITIN).
• Interest-only loans: An interest-only loan allows you to only make payments toward the interest on a loan for a set period of time, lowering the initial costs of homeownership.

Like with a traditional second mortgage, bank statement HELOANs have benefits and drawbacks that borrowers should consider before committing to this type of financing.

Benefits of Bank Statement Home Equity Loans

There are several benefits to bank statement home equity loans, including:

• No need for tax returns: Bank statement home equity mortgage lenders don’t require borrowers to provide proof of income in the form of tax returns or pay stubs. Instead, lenders will evaluate a borrower’s ability to repay based on bank statements that prove they earn enough to cover the monthly payments.
• Loan amount: Second mortgage bank statement home loans allow you to borrow more money, and you’re not limited in where you can spend it. These loans are secured by your home, allowing you to access more than you could with other types of loans and credit cards. How much you can borrow depends on your lender, but you may be able to borrow up to 85% or more of your home’s value. We offer loan amounts up to $500,000 (exceptions granted up to $950,000).
• Interest rates: Bank statement second mortgage interest rates are typically lower when compared to personal loans, business loans, merchant cash advance loans, credit cards, and other types of debt you may need for whatever you plan to purchase. Because securing your loan with the home increases the loan value, it ultimately reduces the risk for the lender, allowing them to offer lower interest rates.
• 12- or 24-month bank statements: Lenders can look at 12- or 24-months of bank statements to determine your eligibility and ability to repay. For example, if you started a business in the last two years, you can choose to share two years’ worth of monthly bank statements or just one year, depending on your income.
• Tax benefits: Some borrowers may be able to take mortgage interest deductions for interest paid on a bank statement second mortgage loan.
• Keep the rate on your first mortgage: A HELOAN is a second mortgage that can be used to access the equity in your home without having to refinance your first mortgage.
• Finance multiple property types: Bank statement home equity loans are offered on primary residences, second homes, and investment properties.
• Low fixed payment: Stretch out the fixed term of your home equity loan to as long as 40 years to lower your payments and maximize cash flow.
• Lump sum of cash: With a bank statement cash-out refinance loan, you can receive a lump sum of cash at closing that you can use for virtually any purpose.
• Renovation loan: No-income bank statement home equity loans can be used to make improvements to the property. A renovation HELOAN can modernize the home with upgrades, additional rooms, a pool, landscaping, and more.

Downsides of a Second Mortgage Bank Statement Loan

Second mortgage bank statement loans can offer you access to cash when you need it most, but there are some downsides, including:

• Loan costs and fees: Second mortgages can be expensive, whether they’re traditional or non-QM second mortgages. Like with a first mortgage, borrowers will have to pay costs for credit checks, appraisals, and other various fees.
• Interest: While interest rates on bank statement second mortgages are often lower than other types of credit, borrowers will still have to pay interest, which can be higher on your second mortgage than on your first.
• Foreclosure risk: When you take out a second home loan, you risk foreclosure because your property is collateral. If you fail to pay your loan, the lender can take your home through foreclosure, which can have serious financial repercussions.

Taking out a second mortgage typically affects your credit score, in the same way that taking out your first mortgage or any other type of debt will. In general, finalizing a mortgage, refinancing, or getting a second mortgage can initially cause your credit score to drop. However, it should go back up if you practice good financial management and make payments on time.

When you apply for a second mortgage, the lender will make a hard credit inquiry, making your score drop a few points. Then, once your mortgage is finalized, your credit score may drop again because you haven’t made any payments yet, and your account age decreases when any new debt is added. However, as you pay down your mortgage, you can start building your credit back up, even improving upon your initial credit score.

In order to qualify for a bank statement HELOAN, you must meet certain requirements. Below are some of the key requirements that borrowers must meet to get this type of second mortgage: 

• Self-employed: Must be a business owner or self-employed for at least two years. One year of self-employment will be considered if you’ve been in the same line of work for at least two years. 
• Credit score: Borrowers must have a minimum credit score of 660 to qualify.
• Bank statements: A minimum of 12 months of bank statements are required to qualify.
• DTI ratio: Griffin Funding can provide financing to borrowers with a debt-to-income (DTI) ratio as high as 50%. 
• Home equity: In most cases, borrowers must have at least 15% equity in their home to qualify for a self-employed home equity loan. 

Property appraisal: The property must undergo an appraisal to evaluate its current market value and help determine the maximum loan amount you qualify for.

At Griffin Funding, we offer a streamlined application process that makes it simple for borrowers to get a bank statement second mortgage. Here are the key steps one must take to apply for a bank statement home equity loan:

1. Reach out to our team to discuss your loan options and goals. We can help you determine in a bank statement HELOAN is right for you and if it’s available in your location.
2. Fill out an online application or complete an application over the phone with one of our loan officers.
3. We will let you know what loan amount you qualify for and give you the opportunity to lock in a rate on your second mortgage.
4. We will request documents such as bank statements, a credit report, and any other relevant documentation.
5. After the underwriting process has been completed, we will present you with the loan amount, terms, and interest rate you’ve been approved for. If you agree to terms, you will sign the loan document in the presence of a notary and we will transfer the funds.

Bank statement second mortgage loans, also known as no doc home equity loans, may be a great opportunity for you to use the equity you’ve built in your home to fund expensive purchases or consolidate debt. 

Partner with Griffin Funding to capitalize on competitive second mortgage rates and top-tier customer service. With an experienced team, a streamlined application process, and borrower-friendly tools like the Griffin Gold app, we can help you leverage your home equity and secure a home equity loan designed for self-employed individuals. 

Ready to learn more and see if you qualify? Contact Griffin Funding at (855) 394-8288 to speak with one of our mortgage officers or begin the second mortgage application process with our online application form.