Bank Statement Home Loan For Self-employed Borrowers

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
**Update 7/22/2019 - We now have our own internal bank statement product with extremely aggressive pricing whether it's for a refinance or purchase. I've recently refinanced old bank statement loans in the mid to high 4% range, the key is to have 20% equity or down. HOWEVER, only 10% down + reserves is required for this program**

Call Now For More Information or a Rate Quote, we are able to do loans in all 50 states: (619) 379-8999 or [email protected]

**Guidelines updated 07/24/2018 - see below**
10% down 12 or 24 month bank statement program released!

10 Year Interest Only, 40 Year Amortized Loans Just Launched! Watch an explanation below:

As a Sales Manager and Loan Officer of a large bank I have run into just about every situation imaginable in my 10+ year career in this industry. Although every situation is unique, it takes a qualified and seasoned loan officer to understand not only the products that are available but the best ones to suit a specific borrower’s needs.

Throughout this article we will be explaining the different options self-employed borrowers have and the hurdles they typically have to jump through in order to get a new loan. We will also be talking about a portfolio loan option where financing may be made available depending on qualifying factors.

Most self-employed borrowers end up being denied for government or conventional loans due to the way they structure their tax returns. The amount of write-offs on the taxes plays a huge part in determining what you may qualify for (unless you’re seeking a portfolio loan). Most loan programs will look at the previous 2 years of taxes and we would look at either the K1, Schedule C, Business returns…etc in determining the income we’re able to use. Some of the options below may help you in deciding what program to qualify for.

Stepping stone of what I would recommend when speaking to a self-employed borrower:

  • Fannie Mae: Income is taken from a 2 year average on the tax returns and most deductions will be taken out of your gross monthly income causing us to only be able to use the AGI or Adjusted Gross Income with potentially adding a few deductions back into the income. If the borrower doesn’t qualify using this method we would move on to the next.
  • Freddie Mac: In some cases Freddie Mac will allow a self-employed borrower to qualify based off of 1 year taxes. I have heard a rumor (I can’t confirm it yet) that an upcoming guideline change in January will prohibit a borrower from using the 1 year returns unless they have 3 years documentable history being self-employed. I’ve also confirmed that you must obtain a feedback of Accept through the automated underwriting system as well. Finally if a borrower doesn’t qualify using this route I would revert down to the portfolio loan options.
  • FHA: FHA will allow a higher debt-to-income ratio than a conventional loan product would. It may allow up to a 55% DTI in order to qualify and depending on the automated underwriting system it may also only call for one year of taxes.
  • Portfolio Loan: We offer a 12 month bank statement program that analyzes the deposits in the account which are then averaged over a 12 month period and no physical taxes are required. This can be a solution for a business owner or self-employed borrower that has a significant amount of deductions on their returns but overall has a large amount of business deposits. The interest rates on this program are actually quite low in comparison to the majority of portfolio programs in the industry today. These loans start with only 10% down!
My assumption is the majority of the homeowners or future buyers that are reading this article fall into the category of portfolio loans. I’m going to focus on the requirements of that program however feel free to give myself a call or e-mail with any questions on any of the programs we are mentioning within this article.

Portfolio Bank Statement Requirements:
  • Down Payment Requirement: Purchase and Rate & Term Refinance starts at only 10% down! There may be additional down payment requirements depending on the loan amount and transaction type, contact for more.
  • Credit Score: 660 for purchase, rate & term or cash out refinance
  • Foreclosure, DIL, Short Sale, Bankruptcy, Modification or NOD: None in the most recent 2 years
  • Collections, Unpaid Charge Off’s, Tax Liens Judgments: All unpaid items must be paid off prior to closing and based on the situation it is at the underwriters discretion of whether or not the loan will be approved.
  • If additional income is being fully documented for qualifying in addition to bank statements, IRS transcripts for the most recent 2 years must be provided.
  • Eligible Property Types: Single Family, PUD, Condo, 1-4 unit residential properties
  • Income from bank statements will be calculated using deposits only. For more explanation on this please reach out for details.
  • Maximum Debt-to-Income Ratio: Up to 50% considered
  • Interest Only Available
  • Gift Funds: Gift Funds permitted, 10% required from borrower funds.
  • Reserve Requirements: 4 months minimum, loan amounts higher than 1.5 million will require additional reserves.
  • Maximum Loan Amount up to 3,500,000!

I’ve done quite a bit of research in the industry and have found that outside of hard money loans, these options are phenomenal. Prior to a couple years ago, there wasn’t much of a solution for this and most self-employed borrowers ended up being denied home loans for that very reason.

In many cases with these bank statement loans the loan officer is doing the income calculation on their own. The wonderful part of this program is that the underwriter will calculate the income from the bank statements and validate it right away. That leaves out a question of whether or not you're going to qualify for the program.

If you have any questions on the above program you’re more than welcome to reach out to myself at 619-379-8999, Apply Online Here or our LoanSafe direct line of 800-779-4547. You can also reach me directly at: [email protected]. Thank you for taking the time to read this and make sure to take a look at our other articles as they may provide a solution that you may have never been aware of.

We do also offer loans that do not require any income verification at all, if you would like to read more about that please click here: No Income Needed for Investment Property Transactions
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