Quick Read: Success Story of the Bank Statement Loan Program


Success story: not from the last decade

No, this is not a story from 2005.

This home buying story happened quite recently, in fact. Alternative loan programs still exist, and for some home buyers they mean the difference between owning and renting.

With a combination of diligence and a little creativity, owning a home can easily become a reality.

Check your new rate (December 26, 2021)

History of the bank statement loan program

It’s a simple unfortunate truth for independent home buyers.

When you have hard-to-document income or a lot of write-offs, it can be more difficult to qualify for a traditional home loan.

Due to the new rules (circa 2013) and other regulatory measures imposed by the Consumer Financial Protection Bureau, it may be more difficult for your non-W2 employee to obtain a home loan.

The bank statement program allows lenders to grant home loans that do not have to meet the Repayment Ability Rule (ATR).

This option may be ideal for people who earn seasonal income, are independent contractors, or are self-employed. For these applicants, tax returns are anything but the inside of the box. However, these future buyers are much more qualified than the employees.

Ricardo was a perfect example.

He had a thriving business as a self-employed construction worker. But not on paper.

Ricardo had a lot of income each month, but after writing off a significant amount of business expenses, he does not report enough income to qualify for traditional funding.

Thanks to a “bank statement” program from a local lender, all hope was not lost.

The bank statement program does not require any tax filing, so write-offs become a no-problem.

Check your new rate (December 26, 2021)

How does the bank statement loan program work?

Ricardo’s large monthly bank deposits over the past 24 months were enough to qualify him for a bank statement loan.

Lenders who offer the program simply average bank deposits over the past 12-24 months to arrive at monthly income. For example

  • January: $ 5,250
  • February: $ 4,200
  • March: $ 3,500
  • April: $ 8,400
  • May: $ 9,500
  • June: $ 5,300

The average six-month income in this example is approximately $ 6,000 per month. The lender, after consulting a full twelve or twenty-four month period, will base its approval on this amount.

The down payment requirements and the interest rate were slightly higher than those for traditional mortgages.

According to Ricardo, a slightly higher rate and a down payment were well worth the trade-off for owning a home.

Plus, he can always come back next year, after declaring more income on his taxes, and refinance with a conventional loan at a lower interest rate.

What are the mortgage rates today?

Contrary to popular belief, you don’t always have to file a huge pile of tax returns to buy a home.

Even if you’re someone who doesn’t report a lot of income after write-offs, home ownership can still be within your reach.

Talk to a lender who is knowledgeable about your situation. You might be pleasantly surprised at the growing number of creative options available to you.

Show me today’s rates (December 26, 2021)

The information on The Mortgage Reports website is provided for informational purposes only and does not constitute an advertisement for any products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, its parent company or its affiliates.


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