Are you currently self-employed? Do you plan to buy or refinance a home in California sometime soon? If so, you should know about the benefits of bank statement loans in California. This is a unique financing option that could help a lot of self-employed borrowers in the state.
The mortgage industry has become more flexible over the last few years, with new programs designed for borrowers with non-traditional income and employment. Bank statement loans for self-employed borrowers in California are a good example of the diversity and flexibility of the modern mortgage industry. They allow certain borrowers to qualify for a home loan without using tax returns.
Key Features of Bank Statement Loans
So how does a bank statement loan work? What are the requirements for borrowers? Here’s an overview of the key features these products offer:
- Instead of using tax returns, we will review 12 to 24 months of bank statements to determine how much you might be able to borrow.
- In some cases, personal bank statements can be used for mortgage underwriting purposes, but only if the business and personal banking is within the same account.
- If a self-employed borrower has a separate bank account for the business, that account will be used for income verification and underwriting.
- Interest-only mortgage loan options are available as well. These products allow the borrower to pay only the interest (and no principal) for a certain period of time, resulting in a lower payment.
- With a bank statement loan in California, the borrower’s total debt-to-income ratio can be as high as 55%. That’s higher than many other mortgage programs. So it’s a flexible loan product.
- Bank statement loans can be a good alternative for self-employed borrowers who don’t have enough income reflected within their tax returns to qualify for the financing they need.
- The maximum loan-to-value (LTV) ratio is 85% in most cases, up to a loan amount of $1 million.
- For larger mortgage loans of up to $2.5 million, the maximum LTV is usually set at 70%.
Please contact us if you have a question about California bank statement loans that was not answered above, or if you’d like to get pre-approved for a mortgage.
An Alternative for Self-Employed Borrowers in California
With a “regular” conventional mortgage loan, lenders often focus heavily on tax-related documents when verifying income. Tax returns are usually at the top of the list. But for a lot of self-employed borrowers in California, the tax records alone do not show enough income for mortgage qualification purposes.
All too often, this creates a situation where responsible borrowers with steady income cannot qualify for a mortgage loan, simply because of the standard documentation requirements. That’s where the bank statement loans prove useful.
These products are well suited for self-employed home buyers in California with bank records that reflect their true income, over the last year or two. Eligible borrowers could qualify for mortgage financing without providing tax returns, by relying on the income information found within their bank statements.