If you’re self-employed, do freelance work, or are in any other situation that makes it difficult to prove your income, getting a mortgage can be a problem. Traditional lenders require years of documentation to prove your income and employment.
Where does that leave those who don’t have W-2s, employment verification, and tax returns? Banks used to provide self-employed people with an alternative, in the form of non-qualifying mortgages, or non-QM loans. But during the coronavirus recession, these came to a halt. So, now what?
Fortunately, those who can’t easily prove income have always had the option to get bank statement mortgage loans from a private lender. Private money lenders work on a case-by-case basis, not one that has strict requirements.
We’ll outline below the requirements for traditional loans, why it’s difficult to get one if you don’t meet the income requirements, and how private money lenders simplify the process with their common-sense approach.
Why is it difficult for me to get a conventional loan?
For some people, getting a conventional mortgage is no big deal due to easy access to W-2s and proof of employment. While it’s still a lot of paperwork and documentation, they are able to provide all of the necessary items to be on their way for approval.
On the other hand, there are business owners, contractors, freelancers, and seasonal workers. This group of people most likely do not have the tax and income information available to apply for a conventional mortgage through a bank or mortgage lender.
All the proof they have can be easily obtained through bank statements, but conventional lenders can’t accept this as the sole resource. These are some of the minimum requirements for a traditional mortgage:
- Income and assets
- Employment status and verification
- Debts and child support
- Other monthly payments
- Debt-to-income ratio
- Credit history
Getting a conventional mortgage without traditional proof of employment isn’t completely off the table, but for most people, it just isn’t an option. Even if you can provide all of the documentation, it can take months to get approved. For many people, especially real estate investors or families who aren’t able to wait to sell their home before purchasing the next one, timing becomes an issue.
Why can’t I get a bank statement mortgage loan through a bank?
If you’re thinking there has to be traditional options available for those who can’t easily prove their income, you’re right. However, they only popped up in the past couple of years, and when the coronavirus pandemic struck, these options disappeared. Non-QM loans offered flexibility to people who traditional lenders originally deemed too risky.
For traditional lenders, bank statement mortgage loans fell under the non-QM umbrella, which also included Asset-Based Lending and No Income No Asset loans.
Bank statement loan requirements used to include:
- 12 to 24 months of bank statements
- Good credit score
- Two years of history as a self-employed professional
- Cash to cover several months of mortgage payments
- Verification of 401(k) or other liquid assets
- Business license
- Letter from tax person or accountant to verify your situation
Even with the option of bank statement loans for self-employed people, there were plenty of requirements some people still weren’t able to fulfill.
There’s talk that non-QM loans could make a comeback, but with their history and recent disappearance, it’s going to be extremely difficult to find a traditional lender willing to provide this option.
Private money lenders consistently offer the type of flexibility that self-employed and contract workers need to get a mortgage, and with far fewer requirements. It’s all about the deal — if it makes sense, it will get approved.
How to use bank statements to get a hard money loan
Private money lenders like Marquee Funding Group accept bank statements when considering your situation for financing. In many cases, we ask for two years of one of the following forms of documentation: bank statements, tax returns, or W-2s. We can even do loans for borrowers who were employed within the last six months.
Our lending decisions are based on the benefits for you and the merits of each deal. Our top priority is building relationships with borrowers and making common-sense decisions. We look at your bank statements and assets to determine what goes in, what goes out, and what’s left over.
We work hard to make sure your loan gets approved when the banks can’t do it, and we specialize in complex or challenging real estate transactions.
- Same-day approvals
- Common-sense underwriting
- Closing in as quickly as seven days
- Loan amounts from $50,000 to $20 million
- Single family, multi-family, commercial, industrial, land, and construction loans
- Purchase money, rate and term refinance, and cash-out refinance loans
- Loan-to-Value up to 70% (deal specific)
Your employment situation might be too uncertain for banks, but for us it’s a typical deal. We want you to feel valued and respected as a borrower.