What is a Bank Statement Loan?
Bank statement loans are a type of non-qualified mortgage loan that allows you to qualify based on bank statements instead of tax returns. The lender will require prospective borrowers to provide a certain number of months worth of bank statements in order to prove their ability to repay the loan. This enables self-employed borrowers to access home loans, even if their taxes don’t reflect their full income. Bank statement mortgage programs are often a good option for self-employed individuals, business owners, and retirees who need an alternative income verification option.
Pros
- No income verification: Bank statement loans do not require traditional income verification, making them a great option for self-employed individuals or those with non-traditional income sources.
- Faster approval process: Since bank statement loans do not require extensive income verification, the approval process is often faster than traditional loans.
- Higher loan amounts: Bank statement loans may allow for higher loan amounts than traditional loans, making them a great option for those looking to finance larger purchases.
Cons
- Higher Rates: These loans often have higher interest rates than traditional loans, which can make them more expensive over time.
- More Documentation: They may require borrowers to provide more documentation than other types of loans, which can be time-consuming and frustrating.
- Tougher Qualification: Bank Statement loans may be more difficult to qualify for than other types of loans, which can make them a less attractive option for some borrowers.