what is a bank statement loan

A bank statement loan is a type of non-qualified mortgage loan that allows self-employed borrowers to seek a home loan without having to show net income on tax returns or pay stubs. Instead, the lender uses bank statements to analyze a borrowers income over 12 to 24 months to determine the borrowers net income, which is the amount of money earned after the borrower has paid taxes and business-related expenses. Bank statement loans are also known as stated income loans. They are most often used by self-employed borrowers who have inconsistent income, dont receive traditional paychecks, or claim significant tax deductions. Bank statement loans are considered riskier than typical mortgages, and many banks and mortgage lenders don’t offer them because they are non-qualified mortgages (non-QM), meaning they aren’t backed by Fannie Mae and Freddie Mac, so there’s less protection for lenders and borrowers. However, some lenders offer bank statement loan programs, and borrowers can work with mortgage brokers to find them. To qualify for a bank statement loan, borrowers should maintain a good credit score (660 and up) . Bank statement loans can be a good option for self-employed individuals, business owners, entrepreneurs, and investors who don’t have traditional income sources and pay stubs to prove their income.