What Is A Bank Statement Loan?
A bank statement mortgage loan is a type of mortgage that allows borrowers to use their bank statements to verify their income, rather than using traditional income documentation such as tax returns and pay stubs. This type of loan is often used by self-employed individuals or those with irregular income who may have difficulty meeting the strict income requirements of traditional mortgage lenders.
Instead of providing W-2s or pay stubs, borrowers applying for a bank statement mortgage loan are required to provide several months of personal and/or business bank statements to demonstrate their income. Lenders will typically review the deposits and withdrawals in these statements to determine the borrower's income and expenses, and use that information to calculate their debt-to-income ratio and determine whether they qualify for the loan.
While bank statement mortgage loans can be a useful option for those who don't have traditional income documentation, they often come with higher interest rates and stricter eligibility requirements than traditional mortgages. Additionally, borrowers may need to provide a larger down payment and have a higher credit score to qualify.
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