Bank Statement Loans Explained: Part 1 | What They Are

If you're self-employed and your tax returns don't show enough income to qualify for a traditional mortgage, a bank statement loan could be the solution. In this video, we break down how bank statement loans work, who qualifies, the differences from pre-2008 stated income loans, and why these programs can help self-employed borrowers purchase or refinance a home.

Transcript

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Hey everyone. Welcome back to All Things Home Loans, Credit, and Real Estate. I am your host, Deb, the Mortgage Queen. So let's start learning. Self-employed and you can't qualify with a tax return. Let's talk bank statement loans. And it's not 08. Don't panic. It's not 08. It's post-08, and we learned from our mistakes. Don't you be freaking out on me. Bank statement programs are awesome. Let me just give you a little bit of background. So I started in the mid-90s for my career. I didn't really know what I was doing back then, but I started in the industry that we were doing bank statement loans and stated income loans. Those are the loans that I was very well versed in. That's just what we did. Most people were self-employed, or we had one person self-employed and W-2'd. So we just had to utilize all those programs. They were incredible until the wrong idiots got them in the wrong hands. That's a nice way to say it. Anyways, so what this is, is it's a program set up to be able to cater to self-employed people. You've got to be self-employed. Now, self-employed is described just a little bit differently. Let me do a little bit of a side note here. When I'm doing a traditional finance loan and I am a W-2 employee of the company I own, I am considered self-employed. On a traditional loan, it's frustrating to people. I get it, it's frustrating to people. In this, we're okay with that. It's okay if you're a W-2 employee of your own company because you're still considered self-employed. You still have to verify how long you've been self-employed. And then there's a whole thing we've got to go through with how we analyze those bank statements on how much we can actually use. The program is designed for primary residences with a 10% down payment, as little as 10%, I guess you could say, second homes and investment properties. They're incredible. They really are. I just for what they could charge in interest, they don't charge what you think that that's going to be. Yes, it's more expensive. I'm not gonna lie to you, it is more expensive, but it could be worse. And I actually have done a handful of these, and the rates were wait, it's that low? Really? Okay. It's more surprising. Now there's been a couple well, I'm sorry, it's that terrible, but it got him into a house. So pick your poison. Rent forever, pay 100% interest, or bite the bullet, get into the market. We'll have a conversation, get y'all figured out. Definitely have to be self-employed. That's number one. Number two, we go through and we analyze those bank deposits that we have certain percentages of things that we'll get into a little bit later. Definitely follow and subscribe so that I can explain all that. But there's calculations that we've got to go into which amount or how much of the deposit we can actually use. Um, it can be used for purchasing, it can be used for refinancing, it can be used for cash out refinancing. So if you've got investment properties or you've got a primary residence you need to get some equity out of, we can do cash out refinance. It's definitely something that can be done. Most common borrowers we see, contractors, are a big one, real estate agents are a big one. And then summer sales guys, you go out there and you just kill it knocking doors and you make all these people mad and the HOAs panic and it's fine. It's great. I have a couple of sons that do summer sales and I'm proud of them. But the summer sales guys, contractors, realtors, really anybody who's self-employed, the trades that are actually self-employed, the self-employed key is what we have to stick to. It's hard if you're a W-2 because you're on a fixed number on self-employment. It's just the harder you work sometimes, the more money you make. That's where self-employment comes in. Commission-based professionals, when that is workable, but it has to be a 1099 commission. It can't be just a base plus commission. I'm receiving a W-2. There's a little bit of an issue with that part of it. So we do have to verify income. We do have to make sure income exists, and that's where those bank deposits come in. It's not a stated income loan. We're proving you do actually have income coming into the home. That's critical. There is a little bit of a difference. Before 08, we didn't work on bank statements. So that's fine. Let's just list on stated income whatever money we need for you to be able to qualify. Yes, that crap happened. But uh luckily we survived. Really, it just comes down to I write off all of everything that I possibly can write off on my taxes. My CPA is super awesome, super aggressive. I pay little to no money towards the IRS. Hashtag I'm proud of you. But at the end of the day, it hurts when you're doing mortgage loans. If you don't document income on your tax returns, you don't qualify for a traditional loan. It is that simple. This gives us a vehicle to be able to utilize the tax returns, or excuse me, not utilize the tax returns, utilize the bank statements and the deposits to go into that so that you can qualify on a home. So am I an advocate for you not paying your income taxes? Uh no. Am I jealous of people who don't have to pay as much tax as me? Yes. Yes, I'm very jealous. I am a jealous human for that. But you definitely have an avenue if you are aggressive on your tax returns. We can run through things preliminary and just see if it's something that you can qualify on. And if not, let's get you lined out on what you can do. So if tax returns aren't gonna work, bank statements aren't gonna work, let's get a game plan on what can work. And from there we'll be able we'll be able to build it all out. You have the ability to plan if you know what you're planning for. So if you don't want to do a bank statement loan, let's plan a couple years in advance to be able to get your tax returns filed the way that they need to be filed. If you don't want to go that route and you don't want to pay the IRS as much as you could have to, or you have a lot of write-offs, so you're in that spot that it's really nice, you don't have to, then let's tackle the bank statement loan and prep for the down payment because we have to have a down payment on that. So follow, subscribe. We're gonna walk through what this looks like for the next couple of episodes. And I would love to teach you so that you can share this with people that would benefit self-employment people, say people who are saying, Well, I can't qualify because I don't pay any money to stupid IRS. I can't really say they're stupid. They're wonderful people who do something for us. We just don't know what it is. I love making statement progress, been doing them for a long time. So subscribe, share, follow me, do all of the things, and uh we'll see you on the next one. Thanks so much for listening. I really appreciate it. So stay tuned. We are gonna learn some more next time.