A bank statement mortgage can help you if you are self-employed, and significant tax deductions make your income look smaller than it is. Lenders can look at bank statements to determine your cash flow and, from there, qualify you based on your real income and not the “income” they see on your tax returns.
If you are self-employed, a business owner, a freelancer or contractor, or perhaps a seasonal worker, you might be interested in a bank statement home mortgage. Here’s what you need to know:
What Is a Bank Statement Mortgage Program?
A bank statement mortgage program allows you to use your business bank statements to show that you have enough revenue to afford the mortgage payment. The bank statement mortgage will give you a better interest rate than a traditional mortgage because it’s based on your cash flow instead of your tax return income.
Terms may require the income from the business to be deposited at the bank named on the mortgage for a certain period of time before qualifying for the bank statement mortgage.
Your bank statement can show that you have enough income to afford the mortgage payments. The interest rate will be based on cash flow, not the amount of income your tax returns show.
This type of mortgage is sometimes called a “pot of gold mortgage” because you can use your business income to prove you have a pot of money that you will use for the monthly mortgage payments.
When Is Using Personal Bank Statements a Better Option to Qualify for a Mortgage Instead of W2s?
There are a couple of situations when a bank statement mortgage is a better choice. First, the bank statement mortgage will have a better interest rate than a traditional mortgage. Second, if your employer is fudging your W2—for example, your employer will report $50,000 in W2 income even though you only earned $40,000—a bank statement mortgage will help you qualify for a mortgage based on the actual income you earn.
With a traditional mortgage, the lender will see the $50,000 income on your W2 and may deny you a mortgage, or they may give you a higher interest rate to compensate for the extra risk.
Who Should Get a Bank Statement Mortgage Loan?
Bank statement mortgages are available for self-employed applicants and for applicants who are self-employed, own a business, or are considered independent contractors for tax purposes. This can include a variety of work situations, including:
- Companies that do not issue 1099s and don’t report to the IRS, CRBA, or DBA
- Companies that under-report income on 1099s
- Independent contractors
- Seasonal workers
- Real estate agents, home-based business owners, and the self-employed
If you are self-employed, have a business, or are an independent contractor, talk to a lender to find out if they offer a bank statement mortgage loan.
Your Mortgage Team at MidAmerica Bancorp
If you are self-employed, a business owner, or have a seasonal job, a bank statement mortgage may be the solution to getting the home loan you need. Banks will be able to see your cash flow based on your business bank statements instead of your tax returns. This will give you a better interest rate on your mortgage because it will be based on your actual cash flow instead of the income your tax returns show.
If you’re ready to find out if you qualify for a bank statement mortgage, contact a mortgage broker from MidAmerica Bancorp, Inc., who can assist you. We serve Hickory Hills, Chicago, nearby areas, and the states of Florida, Illinois, Wisconsin, and Indiana. Call us at (708) 237-4050 today to learn more!