Does my type of income qualify me for a conventional loan?(Bank statements loan?)

Question

Hello all,Just a general question. I primarily work with hard money lenders to satisfy my needs when it comes to my projects as a fix n flipper, however there is also benefit if I'm able to work with conventional loans, such as possibly getting FHA approval to buy a multi-family property.The issue is, my income isn't consistent which I know is a problem. I don't receive monthly deposits, instead its just large deposits every 4-5 months or so. I know there's the option of getting loans based on bank statements, but even with this information is it possible to get a loan still? Or, am I gonna have to tough it out longer until I'm generating monthly income?Thank you!

Jack Matthias · Answer

Are you self employed? I wouldn't really be able to get you an answer without looking at your past 2 years of tax returns. If you'd want me to take a look, shoot me a message and I'll get you my email. Thanks

Erik Estrada · Answer

Hi Faiz,

This answer highly depends on how much you report in income for the past 2 years. If the income reported can support a total monthly housing and debt expense of no more than 49% based on the loan amount applied for, you should qualify for conventional financing. Credit is also a huge factor. You may also qualify with 1 year tax returns if you have more than 5 years in business. A minimum of 620 is required for most conventional loans.

FHA may allow a max DTI of 56.9% however, you will be limited to a housing expense of 46.9%. You also must qualify with 2 years of tax returns. Also, on MFH 2-4 unit you will be required to pass the self sufficiency test to qualify. This requires that 75% of the rents cover the full mortgage payment.

Derek Brickley · Answer

Got it!  Nope the fact that it's not monthly does not in and of itself disqualify you.  Would be happy to connect and learn more about your situation though to see if we might be able to help!

Caroline Gerardo · Answer

Sounds like you expense a good deal of your earnings on IRS returns, which is typical for self employed people. If the net number is negative or zero - probably does not work with owner occupied purchase. A maybe for non owner conventional with big down payment.

A bank statement loan is a NONQM product. Your high FICO is used in the rate. We take 24 months statements of ONLY ONE bank account. Your deposits of rents or sale of property could be used to show income for a "flip investor." An expense ratio is applied to the type of business and how many employees you have- one man band flipper probably we take 10-15% off the averaged deposits. That number is the income for debt to income ratio - so your bills matter as well: vehicle loans, student loans even if deferred, credit cards are in the back end ratio. A bank statement loan can be owner occupied or investment 1-8 units. The rates vary for property type, use etc. Rates are lower than DSCR and close to conventional. Property has to be ready to rent if an investment not a rehab. The lender must be NMLS licensed in the state. Many "lenders" on BP are not. There are also 3 month, 6 and 12 month programs - I gather your statements and review with you. Deposits like a refund from IRS or deposits that don't match to the business type can be excluded.

Paul De Luca · Answer

I recommend connecting with @Zack Karp to discuss your options. He works with many investors in Chicagoland.

Dave Skow · Answer

@Faiz Kanash- if you have been  doing  what you do  for  2 yrs + and  your  report the income on your tax returns ...there is a chance you might be able to get a fha or conv loan.....FHA is only for  primary residence ....You can  always  consider DSCR loans for  rental purchases

Faiz Kanash · Answer

Essentially both, yes! Either use it to purchase a primary residence, or purchase a multi-family property and live in one of the units while renting out the rest(preferably the second option). And yes, my deposits are primarily from my flipping business.

I'm just overall unsure whether or not I'd even qualify for FHA/conventional due to the fact that my income isn't monthly.

Derek Brickley · Answer

Hi Faiz!  So then are you possibly looking to buy a primary residence or an investment property?  Correct me if I'm wrong, but it sounds like the deposits are from your flipping business?  Whether this income would qualify you or not would largely depend on how much you claim on your taxes and for how many years.  A safe, generic guideline is to average your taxable income for the past 2 years.  Bank statement loans of course would look at the total deposits into your account and use a percentage of that as income.  Hope that helps, but definitely depends on your situation and what exactly you might be looking for!

Does my type of income qualify me for a conventional loan?(Bank statements loan?)

Most Popular Reply