This program allows qualified borrowers to use their bank statements to demonstrate their income and qualify for a mortgage loan. The program is aimed at individuals like independent contractors, freelancers, business owners, and commission sales people, who generally lack traditional employment verification documents.
When applying for a mortgage loan, the 12-month Bank Statement Program offers an alternative to traditional documentation such as tax returns, pay stubs, or W-2s. With this program, lenders use two most recent business account statements (personal accounts are not accepted) and analyze the borrower’s average monthly deposits over the past year to determine income. Generally, there has to be at least 12 months of bank statements covering the period of time during which the borrower was in business, however the exact requirements will vary from lender to lender.
When using the 12-month Bank Statement Program to qualify for a mortgage loan, it is important to note that many lenders may impose additional conditions based on the borrower's type of business and financial history. Generally speaking, the borrower must have been in business for the past 24 months, have a minimum 3 months' cash reserve requirement, and provide adequate business documentation.
In addition to basic business documentation such as profit and loss statement, or Schedule C, some lenders may require additional documents such as client contracts or invoices. Additionally, lenders may require the borrower to go through a personal tax return review in order to verify income.
The 12-month Bank Statement Program provides a great opportunity for those with non-traditional income sources to qualify for a mortgage loan. But borrowers should be aware that the requirements and conditions will vary from lender to lender, and they should contact their lender or mortgage broker prior to submitting an application to get more information on the specific requirements needed.
The 12-month Bank Statement Program provides potential homeowners who may have unique income sources or are self-employed an opportunity to secure a mortgage loan. Rather than relying on the typical verifications of income such as tax returns, pay stubs, or W-2s, these borrowers can use their bank statements. In order to qualify, the borrower must provide two separate recent business accounts, with a minimum of 12 months of activities, in addition to other general documentation requirements such as a profit and loss statement, or Schedule C. Depending on the lender, borrowers may be asked to submit additional documents such as invoices or contracts, as well as go through a personal tax return review to verify their income.
This program is a viable option for those individuals who have difficulty providing standard income verification documents, but it is important to be aware of the additional conditions and requirements that lenders may impose. Therefore, it is crucial to contact the lender or mortgage broker prior to submitting an application to inquire about the specific conditions needed for qualification.
In conclusion, the 12-month Bank Statement Program is a great opportunity for those with non-traditional income sources to be able to secure a mortgage loan. Understanding the specific requirements for qualification and knowing what documents you may need to provide is essential in order to ensure that you are eligible for the program.
This article was contributed on Nov 07, 2023
