Mortgage loan approvals for self-employed borrowers has been labeled as very challenging ever since the housing crisis from 2008-2010. The reason for this is largely due to lots of self-employed borrowers not showing sufficient income on their tax returns due to their many write-offs.
Business owners and 1099 contractors tend to deduct all the expenses they are allowed to under federal law. Fortunately, the bank statement loan has become a great income verification option for self-employed borrowers seeking a mortgage who don't want to provide copies of tax returns.
This alternative income loan product allows you to count 100% of job-related deposits on personal bank account statements OR when using business bank statements as much as 90%. These are known as "bank statement loan" programs which I am licensed to originate in the states of California, Colorado, Florida and Texas.
Under this program's guidelines, you need to provide 12-24 months of your business and/or personal bank statements. The lender’s underwriter reviews the monthly deposits that are work related, averages them over 12 or 24 months, and uses that amount as your monthly qualifying income.
Firstly, one borrower must be self-employed. Gather these documents for the underwriter to review:
This is right in my wheelhouse as I close many of these loan products and know exactly what underwriters look for. You'll benefit with:
Additional bank statement mortgage questions and answers.
A recent introduction to the self-employed mortgage options is the P&L Loan.
How does it work?
The borrower(s) requests their CPA to provide a Profit & Loss (P&L) statement for either last year or two full calendar years back (example: 2018 & 2019 tax schedules) and a YTD profit and loss for the current year.
With 24 months P&L you can get a maximum of 90% financing with 720 FICO scores.
With 12 months, up to 85% financing may be offered to qualified borrowers.
No bank statements, no tax returns and no IRS tax transcripts are given.
Borrower must have at least a 25% ownership the previous tow years
The business needs to have been making money during the last two years.
80% financing maximum with a middle FICO credit score of 680 and above
We have a no income verification program that does not require any income documentation at all.
• No Tax Returns Required
• No 1099s
• No Pay-Stubs
• No W2’s
• Yes - Liquid Asset statements
A 25-percent down payment is required for a purchase transaction and 70-percent financing for refinancing. Additional criteria is needed as well which is why it's recommended to contact an experienced loan officer (like myself) that specializes in no income verification loans.
Perfect for borrowers who are self-employed or retired and have 30-percent down payment and 1-2 years of the proposed mortgage payment in reserves OR have $1 million in liquid assets. Primary, vacation, and investment properties are eligible.
Minimum Loan Amount: $453,100
There is a no income and no job disclosure program that you may qualify for based off the property's rent or a rent survey. Borrower(s) will need at least a 20-percent down payment. Not all borrowers or properties are eligible.