Self-Employed Refinancing: How to Get a Bank Statement Cash-Out Refinance Loan

What Is a Bank Statement Refinance Loan?

A bank statement refinance loan — specifically a bank statement cash-out refinance — is a type of refinancing solution that allows borrowers to use bank statements to qualify rather than traditional income documents, such as tax returns or pay stubs.

Bank statement refinance loans work just like standard cash-out refinance loans. You take out a loan that’s larger than your current mortgage, pay off your existing loan balance, and pocket the difference. The only difference is that you qualify for the refinance loan using a series of bank statements rather than traditional income documentation, providing a more accessible pathway for self-employed homeowners.

Traditionally, mortgage lenders rely on tax returns or pay stubs to assess a borrower’s income and determine their eligibility for refinancing. Yet,  approximately 16.75 million workers — or 10% of the total workforce — reported being self-employed in 2024, and providing this type of income documentation can be challenging for this population.

This is where bank statement refinance loans shine. For self-employed borrowers, who may not have consistent pay stubs or traditional employment records, the ability to use bank statements as proof of income can be invaluable. By leveraging their bank statements, borrowers can unlock opportunities to do things like:

• Consolidate debt
• Finance home improvements and renovations
• Invest in real estate
• Cover education and medical expenses
• And much more

Who Are Bank Statement Refinance Loans for?

Bank statement refinance loans cater primarily to self-employed individuals and business owners who may face challenges in documenting their income through traditional means such as tax returns or pay stubs. However, they also serve a broader spectrum of individuals with non-traditional income sources, including:

• Consultants: Individuals providing specialized services on a contract basis, often with varying income streams.
• Contract Workers: Those engaged in temporary or project-based work arrangements, whose income may fluctuate.
• Independent Contractors: Freelancers or individuals who work independently for various clients or projects, with income patterns that may be irregular.
• Sole Proprietors: Owners of small businesses who operate as the sole owners, responsible for managing all aspects of their business, including finances.
• Gig Economy Workers: Individuals participating in the gig economy, such as ride-sharing drivers, delivery couriers, or freelance workers in various industries.
• Realtors: Real estate professionals who may earn income from commissions, which can vary based on market conditions and sales activity.
• Entrepreneurs: Individuals who have launched their own businesses or startups, often experiencing fluctuations in income during the early stages of business development.
• Retirees: Those who may have retired from traditional employment but continue to earn income from investments, rental properties, or part-time work.

Pros and Cons of a Bank Statement Refinance Loan

Here are some pros and cons associated with bank statement cash-out refinance loans:

Pros:

• Accessibility: Bank statement refinance loans offer a viable option for self-employed individuals and others with non-traditional income sources who may struggle to qualify for conventional loans requiring standard income documentation.
• Flexibility: Borrowers can use their bank statements to demonstrate income, providing a more accurate reflection of their financial situation over time, which may better align with their actual earning potential.
• Higher Loan Amounts: With the ability to qualify based on bank statements, borrowers may be eligible for higher loan amounts compared to traditional refinancing options, allowing them to access more of their home equity.
• Debt Consolidation: Bank statement cash-out refinance loans enable borrowers to consolidate high-interest debt, such as credit cards or personal loans, into a single payment, potentially at a lower interest rate.
• Investment Opportunities: Borrowers can use the cash-out proceeds from the refinance to invest in home improvements, business ventures, or other investment opportunities that can potentially yield a higher return.

Cons:

• Self-Employment Requirement: In order to qualify for a bank statement cash-out refinance loan, borrowers must be self-employed for at least two years.
• Documentation Requirements: While bank statements replace traditional income documentation, borrowers still need to provide detailed financial records, which can be time-consuming and require meticulous organization.
• Potential Fees: Like any mortgage refinance, bank statement refinance loans may come with closing costs and fees, including appraisal fees, origination fees, and other closing costs that borrowers need to consider.
• Risk of Overleveraging: Accessing home equity through a cash-out refinance carries the risk of overleveraging, particularly if the funds are used for non-essential expenses or speculative investments, which could strain borrowers’ financial stability.

For those seeking a streamlined approach to managing their finances, leveraging tools like the Griffin Gold app can help borrowers track their expenses, compare financing options, and stay organized throughout the loan application process.

Bank Statement Refinance Loan Requirements

Here’s a general overview of the qualification requirements one must satisfy to get a bank statement refinance loan:

• Proof of Income: Instead of traditional income documentation like tax returns or pay stubs, borrowers will need to provide bank statements covering a specified period, typically ranging from 12 to 24 months. These bank statements should show consistent deposits and cash flow to demonstrate the borrower’s ability to repay the loan.
• Credit Score: Lenders will assess the borrower’s creditworthiness by reviewing their credit score. Griffin Funding can work with borrowers who have a credit score as low as 620, but keep in mind that a higher credit score will lead to more favorable rates and terms.
• Debt-to-Income (DTI) Ratio: Lenders evaluate the borrower’s debt-to-income ratio, which compares their monthly debt obligations to their gross monthly income. For BSL cash-out refinance loans, Griffin Funding accepts borrowers with a DTI ratio of up to 50%.
• Self-Employed: Borrowers must be self-employed for at least two years in order to qualify for a bank statement cash-out refinance. In some cases, we can work with borrowers who have been self-employed for one year but have worked in the same field or industry for two or more years.
• Property Appraisal: Lenders require a professional appraisal of the property to determine its current market value. This appraisal helps determine the maximum loan amount and ensures that the property serves as adequate collateral for the loan.
• Closing Costs: While cash-out refinances do not require a down payment, borrowers should factor in closing costs, which typically include fees for appraisal, title search, loan origination, and other closing-related expenses. These costs can vary but generally range from 2% to 5% of the loan amount.
• Equity Requirements: Borrowers must have sufficient equity in their home to qualify for a cash-out refinance. Lenders typically require a minimum amount of equity to qualify, often ranging from 20% to 30% of the home’s appraised value after the refinance. Those with sufficient equity in their home may also consider taking out a self-employed home equity loan.

Refinance Your Home Loan as a Self-Employed Individual

If you’re a self-employed individual looking to refinance your home loan, Griffin Funding has tailored solutions to meet your unique needs. With our mortgage refinance solutions for self-employed individuals, we offer more flexible pathways to refinancing a home loan.

Not sure if a self-employed mortgage refinance is right for you? We have plenty of other options that make it possible for self-employed individuals to refinance their current mortgage or buy a new home. Explore our non-QM loans and self-employed mortgage programs to find a solution that aligns with your needs — or, better yet, reach out to the Griffin Funding team and we can help you compare your options.

Get started today and experience the ease and convenience of working with a lender that understands your unique needs as a self-employed individual.