Bank Statement Loans

The Bank Statement loan essentially replaced the “stated income” loan.  Stated income allowed a borrower to “state” a reasonable income based on their line of work.  The philosophy was that self employed borrowers had sufficient gross income to qualify but not net income due to write-offs on their tax returns.  This is the similarity with the Bank Statement loan; gross deposits are used to establish a steady income for a self employed person over a 12 or 24 month period. The type of industry (service or product) and number of employs will determine a percentage haircut to the gross income, similar to an expense ratio. Once the haircut is applied, a final monthly income is calculated for qualifying. Two years of self employed is recommended but the borrower will qualify if they have 1 year self employed and 1 year as w-2 in the same line of work. Otherwise, 18 months is the minimum as self employed.