Buying a house requires a mortgage, which uses your employment details and other documents as requirements. It is pretty easy for employed loan applicants. Self-employed individuals, freelancers, and small business owners might not have all these requirements to get a housing loan, but it’s still possible through a bank statement loan.
This guide will show you the steps and requirements to get yourself the dream home you want using a bank statement house loan.
How Does a Bank Statement Mortgage Loan Work?
Freelancers, small owners, and self-employed individuals constitute a sizable 30 percent of all workers in the USA. It is a portion large enough that lenders can no longer ignore it, so many financial institutions made a way to address the loan needs of this population.
This type of loan uses bank statements as proof of income and employment. On typical mortgages or home loans, banks require documents or evidence of taxable income from regular employees and businesses such as W-2 statements, tax returns, and pay stubs.
These bank statement mortgage loans count self-employed workers as eligible using alternate financial documents as proof. They can get a good housing loan using other guarantees of income and employment.
Features of a Bank Statement Mortgage
Bank statement house loans can lend a maximum of $5 Million using an average 620 credit score for each applicant. The average interest rate is at 5 percent, and most of these loans are interest-only plans to keep payments lower.
To remain competitive against other mortgage solutions and loans, they include flexible plans to fit budgets and payment schedules. There might be no additional fees, such as PMI or private mortgage insurance and prepayment penalties.
To apply for a bank statement mortgage loan, you can use bank statements that prove you earn regular or semi-regular income to support a loan and its monthly payments. You may also need other financial documents.
Getting a Bank Statement Housing Loan
Prepare Your Requirements
You need two years’ worth of bank statements proving your income and funds from your self-employed work, freelance job, or small business, along with identification documents prepared in advance. You can also apply for prequalification in this manner.
Get a Preapproval Letter and Prequalification
A preapproval letter is an authorized statement from the lender that qualifies you for a house loan within the given budget and the other details included in the letter. A home or property seller usually requires this before selling the home and accepting the offer. Most mortgage solutions require one along with your financial documents to speed up the initial steps.
Another step is getting prequalified by making a 10 percent down payment that includes other fees, such as closing costs and proof of reserve funds.
Estimate Your Reserve Funds
You may need to calculate your reserve funds to safeguard your loan payments. Reserve funds will fund your whole yearly payment for the loan, including other fees. Add up the loan payments per month plus interest and tax and multiply it for 12 months. Depending on your loan and initial down payment, you may be required to calculate the reserve funds for either three, six, or twelve months’ worth.
Before, getting a housing loan required regular employment documents. Your taxable income was the basis for approval to get the mortgage. However, changing employment conditions have necessitated more options to include self-employed workers, freelancers, and entrepreneurs who have alternate documents to prove their income and employment status and details.
We at NetLending understand and let self-employed applicants fulfill housing loan needs. Your mortgage applications can be accepted here. Give us a ring to start the process today.