What Do Mortgage Lenders Look For On Bank Statements?

Contributor, Benzinga

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Lenders require documentation that proves your income history and status as a reliable borrower when you apply for a mortgage. Most lenders require tax returns and other financial documents to qualify for its mortgage products. For some borrowers, this isn’t the most accurate representation of their financial situation. If this sounds like you, there may be another option — the bank statement mortgage loan. 

So what do lenders look for on bank statements when it processes a bank statement mortgage loan application? Let’s find out.

The Best Mortgage Lenders for Bank Statements:

What is a Bank Statement Loan?

Bank statement loans are mortgage loan programs that are offered to help some borrowers qualify for a mortgage. Most mortgage types require your tax returns to evaluate your income and ability to repay a mortgage. Bank statement loans are unique in that lenders instead use your bank statements to evaluate your income. This is a valuable option for many borrowers, especially if you are a freelancer, entrepreneur or small business owner. 

Bank statement mortgages loans may come with many advantages, including:

  • A higher maximum debt-to-income ratio of 50%. Your debt-to-income ratio is the number of debt payments you make each month compared to your gross monthly income. You can calculate your debt-to-income ratio by dividing all of your monthly debt payments by your gross monthly income.
  • Acceptance of credit scores as low as 500 in some cases
  • Ability to borrow up to 90% of your home’s value
  • No private mortgage insurance (PMI) requirements
  • Ability to finance primary residences, second homes and investment properties
  • Less paperwork required, including no need to provide your tax returns

Since your bank statement is evaluated more heavily for the bank statement mortgage loan program, it’s important to understand what your bank statement shows and represents.

A bank statement is a document that is issued each month summarizing each bank account. Your statement includes:

  • The cash balance of your account at the beginning of the statement period
  • The total amount of checks and cash deposited into your account during the statement period
  • Transactions that withdrew money from your account during the statement period; this may include automatic payments to pay recurring bills, cash withdrawn from an ATM or from the bank branch and purchases made with your debit card
  • Interest earned on your account, if applicable
  • Service fees or penalties that may have been charged against your account, for example, penalties for withdrawing more money than you have available in your account
  • The cash balance of your account at the end of the statement period

You can also request bank statements for custom periods of time from your bank. For instance, you can request a statement that will detail an entire year’s worth of your bank account history. 

Bank Statement Loan Requirements

To qualify for a bank statement mortgage loan, you must meet a number of requirements. Many of these requirements are the same or similar to requirements for other mortgage loan types.

Good credit: As with any loan product, lenders look at your credit report and credit score to determine your reliability as a borrower. Your credit report includes several details, including your credit account history and credit inquiries on your account. It ]also shows how much credit you have available, how much debt you owe and whether you have a history of making your payments on time. 

Your credit score affects a few factors, such as whether a lender can approve you and what interest rate they can offer you. Some lenders accept credit scores as low as 500 for bank statement mortgage loans. Other lenders may require credit scores as high as 620. The higher your score is, the better chance you have of getting approved and being offered a lower interest rate on your mortgage loan.

Proof of income: One of the most important factors that a lender considers is whether you have a reliable income to make your mortgage payments each month. Lenders may offer a few different bank statement mortgage loan programs, each of which has different requirements.

For this mortgage loan, you will use bank statements to provide your proof of income. Lenders may accept either personal or business statements for these programs. Some may accept both personal and business statements. 

A few common program options offered by lenders are:

  • 12-month bank statement: For these loans, you would be required to provide statements for your bank accounts that show the account history for the last 12 months.
  • 24-month bank statement: This option requires bank statements that show account history for the last 24 months.
  • 1-month bank statement: This option is less common, but some lenders may offer it. In these cases, you would only need to submit bank statements for the last month.

Your assets: Lenders will also want to see the documentation of any assets you have to your name. This can include savings and retirement accounts.

Identification: You will need to provide basic information, such as your driver’s license and Social Security card to prove your identity.

Business documents: If you own a business, you may need to provide a copy of your business license or permit.

Insurance: If you already have home insurance, lenders may want to see this.

Current Mortgage Interest Rates

When you are looking at purchase or refinance quotes, you will see mortgage interest rates come up with your results. The interest rate you are given depends on your credit score as well as the current state of the economy and housing market. Benzinga updates our current mortgage rates regularly to reflect the most recent data.

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5 Best Lenders for Bank Statement Mortgage Loans

Before you select your lender, you’ll want to do some research to find the best fit for your situation. We’ve put together a list of some of the best mortgage companies for bank statement mortgage loans to get you started.

Avg. Days to Close Loan
30 – 40
Minimum Credit Score
620

1. Best Overall: Luxury Mortgage

Luxury Mortgage is a long-standing lender that can offer its borrowers a number of financial products. It has branch locations throughout the U.S., making it a more approachable lender. This ease-of-access means that you can speak with someone face-to-face to help you navigate the mortgage process.

This is a lender that truly believes that there is no one-size-fits-all mortgage, which is exactly what you want from your bank statement mortgage loan lender. Luxury Mortgage can offer you a truly customizable experience to help you feel confident in your mortgage decisions.

Avg. Days to Close Loan
40
Minimum Credit Score
580

2. Best for No Minimum Loan Amount: First National Bank

First National Bank offers a 12-month bank statement mortgage loan program to qualified borrowers. It accepts both personal and business bank statements in your loan application. Unlike many bank statement loan lenders, this lender does not have a minimum loan amount required. This is useful for borrowers in less expensive areas of the country, or those who are looking to make a smaller home purchase.

First National Bank of America also has a higher maximum debt-to-income ratio than many of its competitors. It will accept debt-to-income ratios of up to 55%. The benefits that First National Bank of America offers for bank statement mortgage loan borrowers make them one of our favorite companies for first time home buyers

Avg. Days to Close Loan
N/A
Minimum Credit Score
620

3. Best for 1-Month Bank Statement Program: Citadel Servicing

Citadel Servicing is one of few bank statement mortgage loan lenders who offers a 1-month bank statement program. It also offers 12- and 24-month bank statement programs. You can submit both personal and business bank statements with any of these programs.

This lender makes these programs available for both owner-occupied and investment properties, making it a great lender for a wide variety of situations. It also offers a minimum credit score requirement of 500 for its bank statement mortgage loans. The maximum limit on these loan amounts is $5,000,000.

Avg. Days to Close Loan
21 – 40
Minimum Credit Score
620

4. Best for Second Home Loans: Cross Country Mortgage

Cross Country Mortgage offers its bank statement mortgage loan program for second homes as well as primary residences and investment properties. It does not have a set minimum credit score requirement but does require that its borrowers have good or excellent credit.

Loan amounts from this lender are available in amounts of up to $2,000,000. Cross Country Mortgage offers 24-month bank statement mortgage loans. If you choose this lender, please note that it only allows you to use personal bank statements in your loan application.

Avg. Days to Close Loan
45
Minimum Credit Score
620

5. Best for Hawaii Mortgage Lending: Griffin Funding

Sometimes it can be a challenge to find a good lender if you’re outside of the continental United States. Griffin Funding offers 1-, 12- and 24-month bank statement mortgage loan programs to its self-employed borrowers. You can submit personal and business bank statements with your loan application with this lender.

Griffin Funding requires that borrowers are self-employed for at least 2 years to qualify for its bank statement mortgage loan program. You must also have a minimum credit score of 620 for the 12- or 24-month bank statement loan programs and a minimum credit score of 650 for the 1-month program. You can use bank statement mortgage loans from Griffin Funding to finance your primary residence and second home purchases.

Why Get a Bank Statement Mortgage Loan?

If you have a nontraditional source of income, bank statement mortgage loan programs may be beneficial to you. Most mortgage types require tax returns as an essential part of its application process. This type of mortgage loan allows you to show your proof of income in other ways. If you’re self-employed or a business owner, this may make the difference between qualifying and not qualifying for a mortgage. 

If this sounds like your situation and you haven’t been able to secure a mortgage yet, contact one of these reputable bank statement mortgage loan lenders for a great next step.

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