What Are The Bank Statement Loans Advantages?

Question

Hello Everyone!How common is bank statement loans? recently heard of it but I'm not sure what are the advantages of it? If I can get a good DSCR - in which cases I should consider Bank statement mortgages?Thanks in advance!Ron

Chris Seveney · Answer

Bank statement loans are typically for 1099 workers or those without a stable W2 as they will look at your bank statements over your income / W2 information.

DSCR take into account the property not your bank statements BUT both will look at your credit score which in many instances is the deciding factor as typically need a score above 660.

Patrick Roberts · Answer

Bank statement loans replace your W2 or tax return income with a cashflow calculation based on a 12-24 month history of deposits into your bank account. There is typically an expense ratio applied to this. As an example, if the gross deposits after adjustments over the past 24 months averaged $12k/month, and the expense ratio is 50%, then the lender will treat this as $6k/month in gross income for qualifying.

Bank statement loans are most commonly used for primary and second home purchases, although this income can be used to purchase rental properties with some lenders. Your personal DTI will still be considered with bank statement loans - it simply replaces your how personal income is calculated.

DSCR loans replace your personal income and personal DTI with the income and DTI (DSCR) specific to only the property for the loan (called the subject property). These loans are only allowed for non-owner occupied rental properties.

Zach Wain · Answer

Bank statement loans definitely have their time and place. Self employed clients with high revenue but their tax returns do not show enough income. Primary and second homes are great! Rentals too. Sometimes the pricing is better then DSCR, sometimes it is not. But, it is a good product to have in your mix.

Kristen L Garner · Answer

Both DSCR and Bank Statement loans are very common. In addition to what Patrick and Chris explained - a big difference is that DSCR is ONLY for non owner occupied investment properties while Bank Statement Loans can also be used for primary purchases.

Since DSCR and Bank Statement loans are pricing very similarly right now, DSCR is more popular because it requires less documentation. However, if it is a unique property or the rent is low causing a bad DSCR ratio, then Bank Statement is an alternative.

To qualify for a Bank Statement loan most (not all) programs require you to be self employed for 2 years and you provide 12 or 24 months of your bank statements. The bank statements are then reviewed for any deposits that are income and the income is averaged out to provide your monthly income. This is the "income" part of the DTI equation. The "debt" portion is not calculated by expenses shown in your bank statements. It is calculated by an expense factor. 50% is standard but you can go as low as 10% if it makes sense for your line of work and the loan guidelines allow it.

Both DSCR and Bank Statement allow you to vest in your personal name or in an LLC. Conventional, FHA, VA, and USDA do not allow LLC vesting. This is another reason why many investors use non QM loan products like these.

What Are The Bank Statement Loans Advantages?

What Are The Bank Statement Loans Advantages?

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