Bank Statement Mortgages for the Self-Employed: The Nuts And Bolts
It takes guts to start your own business, but it takes money to buy a house. Yet self-employed people, even entrepreneurs who do very well for themselves, are frequently turned down for mortgage loans if they can’t show a W2.
Because they have so many business expenses to deduct, we’ve even seen doctors and lawyers turned down for mortgage loans because their tax return didn’t accurately reflect their true income.
We’ve also seen business owners who are frequently paid through services like Venmo or Cash App, which banks don’t properly recognize as a source of income.
That’s where bank statement loans come in.
Also known as “self-employed mortgages” or “alternative documentation loans,” these loans are a good choice for freelancers, consultants, small business owners, realtors, or anyone whose income doesn’t fit the punch-the-clock mold. For these loans, no tax returns, W-2s, or pay stubs are required to qualify.
In addition to a good credit score, here’s what we need to see:
- 12 months of personal or business bank statements
- Two years’ history of self-employment
- Bank balance to cover six months of mortgage payments in reserve
- Documentation of other assets you may have, such as investments
- A business license, if you have one
Mike is typical of our self-employed clients: he earns millions each year as a government contractor, yet was turned down when he applied for a mortgage loan through the traditional channels, because his income as a contractor is variable from month to month, and he did not have a W2 to show the bank.
MBANC was able to get Mike into a home after he showed us his bank statements, which demonstrated that he had a very healthy bottom line, and met all of our requirements for a financially secure borrower.
When he signed his loan docs, Mike told us, “I thought it was crazy that I was being turned down for a mortgage, but I’m glad that I found out that there were different ways to get there.”