Ohio offers many small business and self-employment opportunities. The real estate market in Ohio is also affordable, especially when compared to other U.S. states. However, as with any state, securing a home loan while self-employed can be difficult. Self-employed borrowers typically don’t receive pay stubs, which is a requirement with most traditional loans.
A bank statement loan may be a great alternative for self-employed buyers. The program allows interested buyers to verify income using bank statements.
Bank Statement Loans: Proving Your Income, Your Way
Self-employed individuals can easily earn enough income to afford a mortgage loan. However, traditional home loan requirements often require proof of income via pay stubs, something self-employed workers don’t typically have.
Even tax returns can be difficult for the self-employed to show sufficient proof of income. Most self-employed individuals qualify for various tax write-offs, making it difficult to qualify for a loan based on income alone.
Bank statement loans are non-qualified mortgages or non-QM loans. Essentially, bank statement loans were designed to help those with unique income sources qualify for a home loan. Bank statement loans allow self-employed borrowers to submit bank statements rather than relying on pay stubs or tax returns.
Benefits of Ohio Bank Statement Loans
A bank statement loan can be a great alternative to traditional financing requirements. Bank statement loans in Ohio offer the following benefits.
Ideal for Self-Employed Borrowers
Many Ohio workers are self-employed individuals, meaning they don’t receive pay stubs from an employer. Self-employed individuals might include small business owners, freelancers, real estate agents, independent contractors, or gig workers.
With a thriving business scene in many Ohio cities, self-employed workers can earn enough to qualify for a home loan. The bank statement program makes it easier for them to prove income.
No Tax Returns Required
Bank statement loans also don’t typically require tax returns. Instead, the borrower’s ability to repay the loan depends on income via bank statements. This benefits self-employed workers significantly because taxable income isn’t always an accurate financial predictor of someone’s ability to make payments.
Flexible Underwriting Guidelines
Many Ohio bank statement lenders offer more flexible underwriting guidelines. This means that there is more room for customization when it comes to home loan options. Borrowers with lower credit scores due to prior bankruptcy or incurred debt may still qualify with a higher down payment. A non-QM loan is designed to help Ohio buyers in unique situations.
Competitive Interest Rates
Bank statement loans can sometimes offer more competitive interest rates, especially when compared to other non-traditional mortgage options. The interest rates you receive will vary depending on the lender, your minimum down payment, and your credit score.
Can Be Used for Primary Residences, Second Homes, and Investment Properties
A bank statement loan can be used to purchase different property types, including primary residences, second homes, and investment properties. Ohio’s real estate market is thriving, making it a great place to purchase.
Fast Processing
Processing a bank statement mortgage loan can sometimes be faster than with traditional loans. Underwriters can verify qualifying income based on bank statements rather than employment documents, which helps speed up the loan processing. Of course, getting pre-approved for a bank statement loan before shopping can speed up the process even more.
How Bank Statement Loans Work
Here is what you can expect when applying for Ohio bank statement loans:
- Gather Your Documents – The loan application process requires business and personal bank statements and credit information. Some lenders may also require a detailed deposit history, a list of expenses, and proof of money for a down payment to qualify for a mortgage.
- Get Pre-Qualified – A pre-qualification tells sellers you’re a serious buyer. It also tells you the loan amount for which you will likely be approved.
- Shop the Ohio Housing Market – After receiving pre-qualification, you can begin shopping for your home.
- Complete Underwriting – After the seller accepts your offer, you’re ready to close the sale. The lender will complete the final underwriting and determine your ability to repay the mortgage. Once the approval process is complete, you’ll receive a clear to close. The borrower, lender, and seller will meet to finalize the sale.
- Congrats! You’re a Homeowner – After closing, you are officially a homeowner.
How Many Months of Bank Statements Are Typically Required
Most lenders require 12 or 24 months of bank statements to qualify for a home loan. Lenders specifically seek a positive account balance, limited or no overdrafts, and regular, consistent income. They’re also reviewing the bank statements to ensure the borrower has sufficient income to cover the down payment and monthly payments.
How Income Is Calculated
Income for the bank statement program is calculated based on an average per month. After reviewing the deposit history, the underwriter adds all deposits and divides them by the number of months used. This results in an average monthly income, which the lender uses to determine the maximum loan amount.
What Types of Bank Accounts Are Accepted
Most lenders will accept personal and business bank statements from U.S. banks. Depending on the mortgage lender, you may need 12 or 24 months of bank statements.
Ohio Bank Statement Loan Requirements
A bank statement loan can be a great alternative to traditional lending for self-employed borrowers. However, borrowers will need to meet certain eligibility requirements, including the following.
Minimum Credit Score
Most bank statement lenders require a credit score of at least 620. Self-employed borrowers may qualify for an income loan with a lower credit score if they’re willing to pay a larger down payment.
Down Payment Requirements
A bank statement loan typically requires a down payment of at least 10%. Business owners or borrowers with lower credit scores may need up to a 20% down payment. It’s important to note that a larger down payment means less money paid per month.
Debt-To-Income (DTI) Ratio Considerations
Debt-to-income (DTI) ratio requirements vary depending on the lender but are usually between 45% and 55% for bank statement loans. DTI refers to the household debt compared to income, which gives the lender a better understanding of a borrower’s ability to repay the loan amount.
Are you ready to apply for a bank statement loan? Not everyone qualifies for a non-QM mortgage, so make sure you meet the following requirements:
- A credit score of at least 620
- A down payment of at least 10%
- A DTI of between 45% and 55%
- Up to 24 months of personal or business statements
- Apply Now for a Bank Statement Loan –
Eligible Property Types
Bank statement loans can be used to purchase various Ohio property types.
Primary Residence
A bank statement loan can be a great way for self-employed Ohioans to set down roots. A bank statement loan can be used to purchase a primary residence, which is a property in which the borrower spends the majority of the year residing.
Second Home
A bank statement loan may also be an option for a second home. Second homes are usually vacation homes, with Tappan Lake and Cleveland being popular Ohio cities for a second home.
Investment Property
Increase your earnings with an investment property in Ohio. Bank statement loans, including short- and long-term rentals, are also available for investment properties. Business owners who work in real estate, such as those who flip properties, may benefit from a non-QM loan or bank statement loan.
Tips for Applying for a Bank Statement Loan in Ohio
A bank statement loan can help you achieve your dream of becoming a homeowner in Ohio. Here are a few tips to get you started.
Organize Your Business Bank Statements
Before applying for the loan, gather and organize your documents. Include both personal and business bank statements where applicable. Organize your documents by deposit history and date to make them easy to browse during underwriting.
Maintain Consistent Deposits
Income verification is an important part of any home loan, including bank statement loans. Consistent deposits show you earn enough income to cover the monthly mortgage payments.
Prepare Additional Documentation
For some self-employed borrowers, business and personal bank statements may be enough to verify income. However, some may be required to submit additional documents, like proof of assets, business registration, and profit and loss statements. Some lenders may also request that business owners share a list of expenses to determine qualifying income for the loan.
Work with a Knowledgeable Mortgage Broker
The bank statement home loan program is nontraditional, and not all lenders offer it as an option. Before applying for a mortgage, make sure you choose a lender who is knowledgeable about this specific program. Not all financial situations are identical, and the right lender can determine alternative financing options.
Why Choose Pride Lending for Your Bank Statement Loan?
Traditional banks can’t always customize borrower loan requirements. Self-employed lenders may find it difficult to qualify for a home loan based on taxable income alone.
Pride Lending helps interested buyers in Ohio who are self-employed purchase homes. We offer a personalized approach to financing, which means finding the home loan that works best for your financial situation.
Our team is committed to helping Ohio residents become homeowners. Whether this is your first mortgage or you’re hoping to invest in a vacation property, we have programs for you. The borrower is more than another mortgage to us at Pride Lending. We’re dedicated to helping buyers overcome common challenges.
Get One Step Closer to Owning Your Dream Ohio Property With Bank Statement Loans
Traditional methods of financing don’t meet all income needs. If you’re self-employed, you may have sufficient qualifying income for a mortgage, but you’re unable to complete the traditional income verification step.
Bank statement loans consider income based on statements rather than tax returns or W-2s. Our team has the knowledge and experience necessary to help you qualify for a mortgage, regardless of your employment.
Ready to get started? Contact us today at 725-231-0192 or get pre-qualified using our streamlined online process.
