If you’re self-employed you’re most likely aware of the financing rules that apply to self-employed borrowers. Some lenders may ask you for a business license that shows you’ve been in business for at least 2 years this will help prove that you are in fact, self-employed. The bank statement loan program is perfect for borrowers who are self-employed. Other loan programs that self-employed borrowers can take advantage of are, stated income loans, no doc loans, or no ratio loans. Self-employed borrowers can make quite a bit of money, more than enough to qualify for a bank statement loan. However, the struggle with getting a traditional loan for self-employed borrowers is the documents they’re required to provide. Self-employed borrowers will usually choose to skip the headache of trying to prove their last 2 years of self-employment and opt for a bank statement loan. Lenders can offer this program to self-employed borrowers at a low interest rate if their credit score is high enough.
Sometimes self-employed borrowers will use their bank statements as documentation of their income, hence the loan program name, bank statement loan program. With a high enough credit score your lender could waive the income documentation requirement all together. Usually only for borrowers with a credit score of 720 or higher. Another option to avoid the documentation process is to put down at least 25% of the purchase price. Ask your lender if you qualify for an income documentation waiver.
For borrowers who are newly self-employed, if you have conducted the same line of work for the past two years, lenders will most likely use your previous employment record in order to meet the 2 year self-employment history requirement. Sometimes lenders will accept a letter from a Certified Public Accountant or CPA instead of bank statements or other documentation.
If you are planning on submitting a letter from a CPA to your lender, these are some other documents that will need to accompany that letter:
- Business License
- Letter from your Financial Institute
- Self-employment Insurance Coverage
- Reference Letters
- Tax Return Transcript
The bank statement loan program is favored among self-employed borrowers. Your lender will most likely use your bank statements to add up the total amount of deposits received and divide them by either 6, 12 or 24 months in order to determine your average monthly income. Lenders require different information from self-employed borrowers than lenders who are working with a traditional loan. Borrowers will need to show salary information that supports they earn enough income to reassure the lender that the loan will be repaid. Start your search for a lender today and get started with your bank statement loan.