Last week I announced that non-prime loans are back and in this post I want to give more information about one the loan types that fit into this area: bank statement loans.
This loan type is specifically for business owners and independent contractors.
It was designed to help in those situations where there is enough income but where income taxes won’t work because there are too many write-offs, resulting in a low net income on your income taxes.
Using bank statements to prove income can make it possible to buy a home or refinance one even though banks can’t help you.
These loans can be done with business bank statements or personal bank statements. This can be very helpful for those who don’t have separate bank accounts for their business and personal money.
This program can even be done if you have a regular job and a side business. In that case, we would get pay stubs to show income from your job and bank statements to show income from your business.
It wasn’t too long ago that I did one where the borrower had a regular job and a had a side job as an independent contractor. In that case, his taxes hadn’t been filed yet so the only way to get him approved was by using the bank statement program. It worked beautifully and I was able to get him about $200,000 in cash out of his property and still reduce his monthly payment.
And in case you were wondering, these loans have rates fixed for 30 years and for owner-occupied homes, there are no prepay penalties.
At the moment, the minimum credit score for this program is 640. If you need help getting your score up to that, give us a call and we can coach you on what to do to increase your score.
For more details and to see if this program could work for you, call us or fill out the contact form on the Contact page of this website and we can go over your situation to find what solutions are available.
You may remember a couple of months ago when I told you that many of the loan programs that had been available didn’t exist anymore. Whether you remember or not, I have some good news!
Some lenders who stopped doing loans a couple of months ago have come back into the market and started lending again. The programs have changed a little but they are not too different from what was available before.
Of course, some of the more aggressive aspects of their loan programs do not exist today and that is probably a good thing because some of them made those loans a bit too risky. I am all-in to help people who should be able to qualify for a loan but can’t get help from banks. But making risky loans caused some problems around 2008 and we don’t want a repeat of that.
Back to my announcement that non-prime loans are back.
When non-prime lenders left the market and stopped lending, a huge void was created between bank loans and hard money loans. For those who could normally qualify for something in the middle, they either had to pay the higher rates of hard money or they had no options at all.
The huge void that was created when those lenders left is no longer empty. Having these types of loans may not seem like a big deal but for those who can qualify for them, it can make a huge difference in what they can afford, whether it is for a home they are going to live in or an investment property.
In case you aren’t fully familiar with non-prime lending, it is the type of mortgage that exists to help people who fall in between bank lending and hard money. Simply stated, the qualifying guidelines and rates are easier than bank loans and the rates are better than hard money.
They are similar to the old subprime loans but without the major faults of those old programs, like having a 2-year fixed rate and a 2-year prepay penalty.
There are a lot of details that would probably bore you to tears so rather than give you all of them, I will just list some of the highlights:
- All loans have fixed rates for 30 years
- Rental properties can use rental income to qualify
- Bank Statements can be used to prove income
- No prepay penalties on owner occupied properties
Since there are many other details, if you want to know if this type of loan can help you, call us or go to the contact page of our website and submit a contact form.