If you do not have a W-2, you can apply for a bank statement loan in Indiana instead. This alternative to the traditional loan application process allows you to use bank statements as verification of your income instead of tax forms or pay stubs.
Bank statement loans are sometimes perceived of as riskier than regular loans, and for that reason, you may need to work harder to qualify for a competitive rate. Nevertheless, there is a lot you can do to enhance your borrower application. Below are some recommendations to help you qualify for a competitive bank statement loan.
Bank Statement Loan Tips
- Raise your credit score and improve your DTI ratio. As when applying for a traditional loan, you are more likely to qualify for affordable rates and fees if you have a high credit score and low debt-to-income (DTI) ratio when you apply for a bank statement loan. Do what you can to improve both of these financial metrics before you apply for your loan. If you need recommendations, we can give you some pointers during your consultation.
- Furnish 24 months of bank statements. At a minimum, you generally need to provide 12 months of bank statements to qualify for this type of mortgage. But you may have the option to furnish up to 24 months of bank statements (and some lenders may require it). By doing so, you can present a clearer and more complete portrait of your financial health, which could improve your qualifications.
- Avoid making large deposits during that time period, and/or be able to explain them. It is important to know that any sizable deposits in your bank accounts beyond your regular payments or bonuses from your employer will draw scrutiny. Why? Because as far as the lender is concerned, there is a chance that someone else has loaned you money. Picture, for example, that a borrower’s friend puts money in their bank account temporarily just to make it look like they have more cash reserves than they really do, and then simply takes that money back after the application process is complete. That is the type of misleading behavior that lenders are on the lookout for when they are evaluating bank statement loan applicants. So, if you have any large deposits during the time that the lender will be examining, you need to be prepared to explain where they came from and what their nature is.
- Do not let checks bounce and/or overdraw during that period. It should probably go without saying, but you also need to make sure that you have a clean record during the 12 to 24 months that you are sharing with the lender. That means no overdraws or bounced checks or other issues that could act as red flags. You want to make it clear that you are good at managing your money and that you do not take on obligations that you cannot meet.
- Increase your cash reserves. Cash reserves represent a degree of financial security. If, while paying off your mortgage, your income is interrupted, you can dip into those reserves to keep paying your debts. The deeper those reserves are, the longer they might last if something were to go wrong, and the less risky it is to loan you money. So, document as much as you can in the way of cash reserves. The more money you have in your reserves, the better your qualifications will be.
- Make a larger down payment if you can. By putting more money down on a home, you can reduce risk for the lender, who no longer needs to extend you such a large mortgage. So, that is another way you can qualify for a more competitive bank statement loan.
- Make sure your career is stable and on track for continuing success. One last item of advice that pertains not just to bank statement loans but to all types of mortgages is to apply for a loan when your career is on target. Many people tend to look upon self-employed borrowers as riskier than traditional employees. But the truth of the matter is that even traditional employees often have a hard time holding down jobs these days, and self-employed borrowers may have skills and connections that help them stay afloat through hard times. If you can demonstrate that your business is well-established, a reliable income source, and likely to be in high demand in the future, then lenders will feel more confident offering you a mortgage. As a result, your rates will be more affordable. Additionally, you will know this is the right time to buy a home, and that is important too.
Apply for a Bank Statement Loan in Florida Now
Have more questions about bank statement loans, or ready to apply for a bank statement loan in South Florida? Contact Premier Lending Corp today at 954-840-8811 to schedule your consultation. We can walk you through the bank statement loan process rapidly so you can close on the FL home of your dreams.