A bank statement loan is a type of mortgage designed for self-employed individuals or those with non-traditional income sources who may not have the standard documentation required for traditional loans. Instead of providing tax returns and W-2s, borrowers can use their bank statements to verify income.

Bank statement loans can be a great option for those with non-traditional income streams looking to purchase or refinance their home.

Key Features of Bank Statement Loans

  1. Income Verification: Borrowers typically provide 12 to 24 months of personal or business bank statements to demonstrate their income. Lenders analyze deposits to calculate average monthly income.
  2. Flexible Qualification: These loans can be more accessible for self-employed individuals, freelancers, and gig economy workers who might not have consistent paychecks.
  3. Credit Requirements: While credit requirements can vary, borrowers usually need a good credit score to qualify.
  4. Higher Interest Rates: Due to the increased risk associated with these loans, interest rates may be higher than traditional mortgage products.
  5. Down Payment: A larger down payment may be required compared to conventional loans, often ranging from 10% to 20% minimum.
  6. Loan Types: Bank statement loans can come in various forms, including fixed-rate and adjustable-rate mortgages.

Pros:

  • Easier for self-employed borrowers to qualify.
  • Similar processing times to traditional financing.
  • More flexible income verification methods.

Cons:

  • Higher interest rates compared to conventional loans.
  • Potentially larger down payment requirements.
  • Limited availability, as not all lenders offer these loans.