Question #1 - Do I need to provide the source or document all of my deposits?
Answer: No. If the deposit size and quantity are normal in your profession, then it is very unlikely it's needed.
Question #2 - Will my deposits that are extraordinarily large count?
Answer: Yes, if you can document the source and show it is normal every year or two.
Question #3 - If I am a business owner, what percentage of business ownership is required?
Answer: The minimum percentage allowed is 25% for a few bank statement programs while others require 50% or 100%.
Question #4 - Are 1099 independent contractors who are not business owners eligible?
Answer: Yes. Additional conditions apply below.
Question #5 - Do I need to be self-employed for a certain amount of time?
Answer: Yes. One borrower must be self-employed for most recent two years.
Question #6 - How do I prove self-employment for 2-years?
Answer: Provide (1) documents from the city, county or state, i.e., the Secretary of State of your filed business name, entity, or license for a specific profession, or (2) a CPA letter (or IRS enrolled agent/licensed tax preparer) that specifies the the borrower's tax filing history for past two years, the borrower's percentage of ownership and years of business existence.
Question #7 - Are 1099 contractors eligible?
Answer: Yes. Provide a CPA letter with specifying the borrower’s tax filing status and confirming the borrower has filed either Schedule C or Schedule E for the last 2 years.
Question #8 - Can other income such as W2 or social security income be used to qualify?
Answer: Yes. This income (yours or co-borrower) is input on the loan application. Social secuirty income will need to be sourced with an award letter. Deposits on the bank statements from other income is excluded from the bank statement analysis.
Question #9 - What if I have other people on the bank account than myself?
Answer: Any person shown as an account holder for the bank account must be a borrower on the loan. If an account holder is not a borrower on the loan, then the bank account statements may not be used.
Exception. If every single deposit can be sourced and documented as the borrower's, then it may be allowed per the underwriter's discretion.
Every business has monthly expenses that may or may not include a lease, phone, utilities, supplies, employees, conractors, etc. The lender needs to know the monthly expenses to operate the business. This is called an "Expense Factor". A letter from yor CPA or tax preparer is needed when the business expense factor is less than 50%. In some cases, a Profit & Loss statement is necesary.
Question #10 - Will they use 100% of my deposits as qualifying income?
Answer; No and Yes. It depends on how your account is structured. See below.
If you are providing 12 or 24 months of personal bank statements and you have a business bank account that you transfer earned income to your personal account each month.
- Yes. 100% of the deposits will be allowed. No Expense Factor applied because expenses already taken into account - must prove existence of business account with 3 months statements.
If you are providing 12 or 24 months of personal bank statements and you don't have a business bank account and use it both personal and business each month.
- No. 100% of deposits is not allowed because this is considered a commingled account (business & personal). A CPA or IRS tax preparer must provide an expense letter for the monthly expenses.
If you are providing 12 or 24 months of business bank statements to qualify account each month.
- No, a certain percentage of eligible deposits will be allowed based on the monthly expense factor confirmed by the CPA or IRS enrolled tax preparer.
Question #11 - Are there deposits that do not qualify as income?
Answer: Yes, deposits that do not qualify as income are transfers from borrower's other bank accounts (not business related), tax deposits, reimbursements, lawsuit settlements, gambling or lottery winnings, etc.
Question #12 - Is zero down or 100% financing available using the bank statement program?
Answer: No. This loan intially started out around 2013 with 70% financing and now offers up to 90% financing (10-percent down). Also, keep in mind that 5-percent of the down payment must be from your own fund. The rest can be a gift from a relative.