If you work for yourself, getting a home loan might seem tough. But there’s good news! Bank statement mortgage loans are here to help.
This type of loan looks at your bank statements instead of the usual paperwork to prove that you earn enough money. It means less hassle and more chances for self-employed individuals like you to get approved for mortgages.
Eligibility Requirements for Self-Employed
To qualify for a mortgage when you work for yourself, lenders want to see your income history. Usually, this means showing tax returns from the past two years. They look at these closely to confirm that your earnings are steady or going up.
Your debt-to-income ratio is also key; it should typically be under 43%. This proves you’re not too deep in other debts and can handle monthly payments on a mortgage. Lenders may check your credit score as well.
A good score helps show them you’re reliable with money lending, which often starts around scores of 620, but higher is better. Finally, consider exploring bank statement mortgage loans. These might suit self-employed people like you by using bank statements to prove income instead of traditional methods.
Understanding Bank Statement Loans
Bank statement loans let you use your bank records as proof of what you earn. You’ll need to show banks 12 to 24 months of statements from both personal and work accounts. This way, lenders check if the money going into your accounts is steady over time.
They add up all deposits for these months, then divide by the number of months to figure out how much you make each month on average. For this type of loan, every deposit counts toward the income they think you have. Remember, lenders will look closely at where this money comes from and any business costs before saying yes or no to a loan.
People who work for themselves like these loans because they’re more flexible than traditional ones but getting them needs careful record-keeping. Choosing a lender skilled in such loans helps since they understand these unique requirements well. Being ready with all needed papers including past bank statements and details about other assets can smooth out applying process.
This kind offers an alternative path to home ownership, especially useful when regular pay stubs don’t tell your full earning story.
Advantages of Non-Traditional Mortgages
Non-traditional mortgages offer a unique advantage for you. These loans allow self-employed individuals like yourself to qualify without the typical mountain of paperwork. Instead, lenders might look at your bank statements or assets over regular income proofs like W-2s or tax returns.
This can be particularly helpful if your business shows more cash flow than taxable income. With options such as stating your earnings and proving asset value (SIVA) or even avoiding both income and asset verification (NINA), these loan types cater to diverse financial situations. However, keep in mind they may carry higher interest rates compared to traditional loans due to perceived risk by lenders.
Also, applying alongside a co-borrower who has stable W-2 employment could improve eligibility and possibly secure better terms with less focus on extensive documentation from you alone. When searching for the best mortgage deal, remember it pays off to compare offers from different lenders thoroughly. Decide which route is optimal based on what each requires concerning documents verifying personal earning power through standard or unconventional modes. Blake Mortgage is an Equal Housing Lender – NMLS#150459
Preparing Your Application as a Self-Employed Individual
As a self-employed person, getting ready for a mortgage means proving you’ve been on your own work path for two years through your tax forms. Suppose you have more than five years under your belt; even better. You’ll need to share both personal and business taxes from the last two periods, plus current profit records and some bank statements of recent months.
Keep an eye on how much debt you carry, too. Your total monthly payments can’t be over half of what you make every month. Good record-keeping, strong credit scores, and picking someone solid to apply with will also help big time when lenders look at giving out loans.
Your company’s upward income trend gets noticed but is based only on what’s officially reported in taxes; planned gains don’t count toward loan calculations—the neat fact there! Some special add-backs can boost your income figure according to different business structures—a handy tip! Click here to learn more.
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