Bank statement programs are a type of mortgage financing designed for self-employed individuals, freelancers, business owners, and others with non-traditional income sources who may have difficulty qualifying for a conventional loan based on tax returns or W-2 forms. Instead of relying on traditional income documentation, lenders evaluate the borrower's income by reviewing their personal or business bank statements over a specific period, typically 12 to 24 months.
In these programs, lenders analyze the deposits made into the bank account to determine average monthly income. This approach allows borrowers with complex financial situations, such as those who write off significant expenses on their taxes or have fluctuating income, to demonstrate their ability to repay the loan. The borrower’s credit score, down payment, and other factors are also considered, but the primary focus is on the consistent flow of funds into their accounts.
Bank statement programs offer a flexible alternative for those who may not fit the mold of traditional lending criteria but still have strong financial standing and the ability to repay a mortgage. These programs can be particularly useful for self-employed borrowers looking to purchase a home, refinance an existing mortgage, or access cash from their home’s equity.