What Is Bank Statement Lending?

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What Is Bank Statement Lending?

What is bank statement lending? Simply put, it’s qualifying the true income for self-employed borrowers. No tax returns. No Schedule Cs, SEs, or IRS communication at all; qualifying is based on business cash flow.

After the mass financial reform in the early 2010s standard lending never quite made sense of qualifying self-employed borrowers unless the customer had minimal business write-offs. Entrepreneurs were left with a catch 22:

  • Pay less in taxes by claiming tax write-offs = lower chances of qualifying for a home loan
  • Pay more in taxes by reducing tax write-offs = higher chances of qualifying for a home loan

You can read more about why standard lending presented this dilemma here. Nevertheless, a problem existed—somewhat. Although reformed alternative lending 1) has been available for several years 2) is government regulated and 3) has fantastic lending options, most customers have no idea they exist, or their nuances. This is primarily due to the refinance boom persisting for the last decade providing lenders all the vanilla business they can handle. Also, and quite frankly, alternative lending can be difficult to grasp. Generally, high-level qualifying is similar amongst alternative lenders, but loan level requirements may vary greatly and can easily present obstacles if your mortgage professional is not savvy.

While one lender may not raise eyebrows for the number of Insufficient Funds fees on bank statements, another may require additional months of savings/reserves or deny the loan altogether. There are also varying requirements regarding the type of bank account being used; or the number of accounts allowed to calculate income; or the number of months needed to calculate income; or the overall method of income calculation. Or. Or. Or.

These examples, just a few of countless, are why customers often have less than stellar experiences with these loans or have never heard of them altogether. Most professionals stick to what they know and avoid venturing outside the box, especially if money is being made. Why is Nile Mortgage different? The owners were blessed with the opportunity to work exclusively in alternative lending for one of the largest private lenders in the nation, and were also the top reps. They mastered the craft while most were working on standard lending options.

Alternative lending options such as bank statement income qualifying are still fantastic lending routes allowing customers to purchase the home of their dream or capitalize on lower interest rates and equity in their properties. The process is different, and the cost and rates are higher vs standard lending, but they still present the valuable opportunities of home ownership, debt reduction, and equity tapping.

Contact us today to discuss the best solutions for your circumstances!

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