Providing An Alternative Verification Method for Untraditional Borrowers
Introduction
Not everyone can provide traditional mortgage documentation. Borrowers who encounter situations like this often find themselves in need of a loan but are unable to qualify for one. The good news is that there are some alternatives, such as bank statement loans, that we will delve into today.
The Loan Process
Bank statement loans are a form of non-QM loan, which stands for non-qualified loan. Non-QM loans are mortgages that don't fit the criteria to be considered a qualified mortgage. Because bank statement loans don't use the traditional methods to qualify a borrower, they're considered a type of non-QM loan. We talk about all things Non-QM on one of our recent blog posts if you want to learn more.
Bank statements are used to qualify, as opposed to W2s or tax returns. In turn, this makes for a faster loan process. Typically, borrowers are expected to provide 12-24 months of bank statements in order to demonstrate cash flow and income. At Defy, we offer options for both personal and business bank statements based on your unique situation and your needs.
Lenders will first review the average daily balances of accounts, then calculate a monthly income figure for underwriting purposes. This figure includes an applicant’s monthly gross income, expenses, and debts. Loan duration, down payment, and interest rate are also factored in.
Use Cases: Is a Bank Statement Loan Right For Me?
If your tax returns don’t adequately reflect your income, a bank statement loan might be advantageous. They are ideal for self-employed individuals, freelancers, business owners, and those who may not have traditional employment and/or income verification. Bank statement loans can be used to purchase several types of properties including primary, secondary and investment properties.
Benefits of Bank Statement Loans
Bank statement loans are a great option for many reasons, the first being flexibility. Not only do they require less documentation, but payment terms also tend to be more flexible.
Bank statement loans tend to be approved faster than traditional options, as they typically require less documentation. This means that borrowers can quickly and easily access the money they need.
Likewise, borrowers can often qualify for higher loan amounts than with traditional loans. This is possible because bank statements enable lenders to access more accurate information in comparison to traditionally required documents.
Finally, bank statement loans have lower barriers of entry in comparison with traditional loans. That being said, they’re appealing to an even wider audience than other loan options.
Defy’s Bank Statement Loan Highlights
- Personal/Business Bank Statement Docs
- Up to 90% Loan to Value (LTV)
- Minimum Fico of 620
- Loan amounts up to $6M+
- No tax returns required
- Options to use a lower expense ratio
- 12-24 months of bank statements required
Additional Requirements
Our mortgage consultants will review additional requirements such as deposit history, cash flow, and steady income for qualification purposes. It’s important to note that consistency is key regarding these transactions, and is a large factor in determining qualification. In addition, our mortgage consultants will also look for overdrafts and bounced checks – both of which can impact qualification.
At Defy Mortgage, we are committed to providing customized loan solutions that cater to your specific needs. Our team of skilled professionals specialize in non-QM loans, guaranteeing you exceptional service. Whatever your situation may be, we are dedicated to assisting you every step of the way. Explore our website to learn more about your loan options.