Bank Statement Loans, the Missing Piece in the Self-Employed Mortgage Puzzle

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You are a free bird. You are an entrepreneur. You’re an independent thinker. You live life on the edge. You run your own business, you work for yourself, you set your own hours, you are your own boss - and life is pretty good.

Until you need to apply for a mortgage loan.

Your success might not look as exciting on paper as it does in real life. And banks only see figures on paper. But that doesn’t mean you’re out of options when it comes to purchasing your dream home, or when investing in a tempting piece of property. You just have to look at things differently. And that is, after one, one thing that entrepreneurs excel at.

How a Free Bird Gets Funded

Self-employment can be truly freeing. And you don’t have to let your dreams get in the way of your - well, your other dreams. If you’re a freelancer, a consultant, a small business owner, or investor, you’re going to face some unique financial challenges. Securing a mortgage is definitely one of those obstacles.

One answer is the bank statement mortgage - especially for those dealing with the nuances of tax returns.

When you're self-employed, it's fairly standard (and smart) to deal with taxes by maxing out your deductions to lower what you owe. But here's the twist: when you're trying to get a mortgage, this clever tax move can backfire. Traditional mortgage lenders will scrutinize your adjusted gross income (AGI) on your tax returns to see if you're good for the loan. So, if your AGI looks low because you've been smart with your deductions, lenders might get the wrong idea and think you can't handle a mortgage payment, even though you can.

It’s not that you’re making less - but in the bank’s eyes, you are.

Say Hello to Bank Statement Mortgages

Bank statement mortgages can be a game-changer for the self-employed crew stuck behind the tax return hurdle. Instead of the usual tax returns, these loans take a look at your bank statements from the past 12 to 24 months, whether it's from your personal or business accounts. It's a way for lenders to get a much more accurate look at how your cash flows in and out, and how dependable you are when it comes to paying back a loan. 

This approach considers the whole picture of what it's like to have money consistently coming in and out - because that’s what it looks like for the self-employed. You’re going to have business expenses that your W2 counterparts do not. This method examines the actual cash you handle day-to-day, rather than just what your tax forms claim.

Pros and Con(siderations)

One benefit is that your bank statements tell a much more detailed story than just a year's worth of AGI. They lay out your income flow, your spending habits, and just how good you are with managing your cash. Lenders appreciate these detailed records, because it gives them a clearer picture of your financial health.

Another perk is a unique understanding - after all, the professionals who handle bank statement mortgages are well aware of the unusual money situation of those who are self-employed. They’re more flexible when it comes to issues like credit scores, how much debt you have compared to your income, and even how long you've been running your business.

Another benefit is the speed of bank statement mortgages. Because you don’t need to verify tax returns, the process can potentially be quicker - so you may find yourself approved before you know it.

There are some factors to consider when you’re looking at a bank statement mortgage - and one of those is interest rates. Bank statement mortgages do typically carry a bit of a higher rate than traditional loans. It’s because it’s an alternative verification process - and it can mean higher risk to the lender.

Also, you’ll need to back yourself up. You will be responsible for presenting an organized, accurate, comprehensive view of all your business-related bank statements. Any gaps can lead to a delay - or worse, a denial. 

Have it Your Way

So who should really think about getting a bank statement mortgage? It's a perfect fit for the self-employed, but it's also a great option for anyone with a less-than-typical way of making money. This includes: 

• Freelancers who see their income go up and down every month, like contractors.
• Business owners who take a lot of deductions for their business expenses. 
• Real estate investors who find their AGI going down because of depreciation. 
• Anyone whose tax returns make it look like they earn less than they actually do. 

Bank statement loans are very different from typical mortgages. They focus on how much cash you've got flowing in and out, not just what your taxable income says. This is definitely handy for self-employed people who might have a healthy business income but look like they're earning less on paper because of smart tax moves. Lenders see the big picture by reviewing your statements, so they get a clear idea of how much money you're handling, including all the money that comes in and goes out.

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Perks of Bank Statement Loans

We’ve talked about some benefits - but there are more perks when it comes to bank statement loans. For one thing, these loans spot the cash you're actually making, which your tax papers might not show. So, if your bank account is healthy, but your tax returns are modest, these loans have your back. 

And they aren't one-size-fits-all loans. They're customized to suit the unique money situations of the self-employed. Whether your income is up and down or just different from the norm, these loans are made to fit your specific financial needs.

If regular lenders have been giving you the cold shoulder, a bank mortgage loan could be your ticket to home ownership. They're designed for people who usually don’t fit into the traditional mortgage mold, opening up the path to owning your own place.

Entering the Maze

Any type of loan application is a process. Before you step into the labyrinth, have your trusted weapon at the ready - that is, a crystal-clear trail of your income through your bank statements. You’ll need to come prepared. Make sure all funds are accounted for and justified, because the lender will ask questions. You’ll also need to maintain a healthy bank balance, since the lender is going to look hard at overdrafts and non-sufficient funds (NSF) incidents.

If you’re a hero in a maze, you’ll want a trusted partner - and that’s the right lender. You want a lender experienced in handling bank statement loans. They’re going to have a better understanding of your situation than a traditional lender, and they’re skilled at interpreting self-employed income. They can even offer tailored advice and loan products. Take your time - shop around, compare different lenders’ terms, rates, and fees to find the best fit.

It’s a Band-Aid

Bank statement loans are just that: loans. They can offer a quick solution to cash flow problems. But they should always be part of a broader, more long-term financial strategy. Consider your future goals and make sure this loan aligns with those plans. Consult with an experienced financial advisor so that you understand how your bank mortgage loan could fit into your overall financial health.

But white any loan should only be part of a long-term strategy, a bank statement loan can be a huge boon to the self-employed. It can help you cross a bridge over traditional mortgage hurdles and provide a smart pathway to home financing.

You’re self-employed - or a contractor, or an entrepreneur - so you’re used to thinking outside the box. That’s what a bank mortgage loan does - so make sure you’re partnering with a lender who gets you. Who can grasp the specific needs of the self-employed. Because while these loans do require meticulous documentation, they can be a huge benefit to you and your growing business.

Learn more: https://trussfinancialgroup.com/