Are you constantly hitting brick walls in your quest to secure a home loan because your income doesn't fit the 'conventional' box? You're not alone. 

The self-employed, contractors, those earning a large part of their income from commissions, and other non-traditional earners often find themselves in this frustrating scenario. 

While traditional financial institutions rely heavily on standard income verification documents such as W-2s and pay stubs, these don't always accurately reflect the financial reality of many potential borrowers.

This is where Bank Statement Mortgages enter the picture. Let's take a look at how this type of mortgage could be the key to turning your home ownership dreams into reality.

What is a Bank Statement Mortgage Loan?

A bank statement mortgage loan is a unique loan product that caters to self-employed borrowers who may not qualify for traditional mortgage financing. 

Rather than relying on conventional income verification documents, such as tax returns, W-2s, and pay stubs, this type of loan uses bank statements to verify a potential borrower's income.

Lenders will typically look through 12 to 24 months' worth of statements to assess your cash flow and ability to repay the loan. To do this, they will look at average deposits going into your account and use that information to calculate your income.   

That means that as long as you can demonstrate a consistent cash flow through your bank statements, you stand a strong chance of securing a mortgage loan, regardless of how 'unconventional' your income might be. 

This approach offers a more comprehensive and accurate reflection of your financial situation, especially for those with irregular income patterns and those who like to take advantage of write-offs during tax season.

Who Is a Bank Statement Mortgage Best Suited For?

Due to its flexible income verification, bank statement loans are an excellent choice for individuals with unconventional earning patterns, such as:

• Self-employed borrowers 
• Small business owners
• 1099 Independent contractors such as freelancers, gig workers, consultants, etc.
• Sales professionals and those who work solely on commission 
• Seasonal workers 

What are the Requirements to Get a Bank Statement Mortgage Loan?

While these types of loans are an excellent alternative to traditional full-documentation loans, there are specific requirements borrowers will need to meet to qualify. These requirements may vary depending on your lender; however, most will typically want to see:

• Bank Statements: Since this is the key component for verifying your income, you'll need to have between 12-24 months of business or personal bank statements. 
• Good Credit: The bare minimum credit score you'll need is 660; however, the better your credit score, the better your terms and rates will be.
• Low Debt-to-Income (DTI) Ratio: Lenders want to ensure that you'll be able to make your monthly payments on time and responsibly, and your DTI is a good reflection of that. Ideally, this number should be 45% or less of your income, but some lenders will approve you with a DTI of 50%.
• Reasonable Down Payment: Depending on your financial situation, the down payment requirements can vary from 10-20%.
• Personal Asset Statements: Many lenders require at least two months' worth of personal asset statements in order to verify your liquid assets.
• Your driver's license: Your driver's license is needed in order to confirm your personal identification. 

For those who are self-employed or run their own business, you will also be required to provide a certified CPA letter stating your percentage of ownership, how long you have been in business, and that your business is active and in good standing. 

How to Increase Your Odds of Securing a Bank Statement Mortgage Loan

If you want to have the best possible chance of securing a bank statement loan with the best rates and terms, then you should strive to: 

Get Your Credit Score as High as It Can Be

Not surprisingly, your credit score is one of the most crucial factors that affect your mortgage application. You want this number to be as high as you can, as a higher score is a signal to lenders that you're a responsible borrower. 

To get your credit score in the best shape possible, we recommend:

• Paying bills on time and in full when you can
• Have a low revolving credit utilization
• Avoid closing accounts unless absolutely necessary
• Working with a specialist to repair your credit

Maintain Stable Financial Accounts

Since you'll be using your bank statements to prove your income, it's imperative that you establish your bank account as soon as possible so you can start building a proof of stable income. 

Lenders appreciate stability, and having steady financial accounts can work to your advantage. To achieve this:

• Avoid making large, unusual deposits that cannot be explained or documented
• Try to keep your income consistent, if possible
• Don't suddenly switch banks
• Regularly monitor your accounts for any errors or discrepancies
• Always keep a positive balance in your account to avoid insufficient funds/overdrafting 

Have The Necessary Documentation Ready to Go

Preparation is key in the mortgage application process. It's always better to be overprepared than underprepared. For this type of loan, you should have these documents ready to go before you fill out the application:

• Full bank statements, including blank pages
• Certified CPA letter 
• Personal asset statements
• Any other documents that show proof of income

Partner with an Experienced Lender

Navigating the landscape of specialized loan products such as bank statement mortgage loans calls for an experienced guiding hand. It's essential to collaborate with a lender who is experienced in handling these kinds of loans. 

Such a lender can significantly simplify the process in the following ways:

• They use a personalized approach. Experienced lenders have a deep understanding of the unique financial circumstances faced by entrepreneurs, contractors, and other non-traditional borrowers. They are well-equipped to handle these situations and provide tailored solutions.
• They provide valuable guidance. Their wealth of experience translates into invaluable advice and guidance that can substantially improve your chances of loan approval. You can rely on them to guide you through the application process and ensure you're well-prepared.
• They help you secure optimal rates and terms. Experienced lenders go beyond merely securing the loan—they seek out the most competitive rates and terms. They'll utilize their knowledge and connections within the industry to negotiate terms that fit your financial situation.

At Modern Day Lending, we're proud to embody these qualities. With over two decades of experience in the field, we've become adept at understanding and catering to the needs of non-traditional borrowers. 

Our team is dedicated to providing a seamless loan application process, coupled with excellent customer service.

As your lending partner, we'll be there every step of the way, offering transparency, competitive rates, swift approvals, and above all, a dedication to helping you achieve your home ownership dreams.

Are you ready to take the first step toward securing a bank statement mortgage loan? Contact our team of experts today, and let us turn your dream into reality.