South Carolina offers consistent human equality laws, anti-discrimination protections, and vast business opportunities. Charleston, Raleigh, Greenville, and Columbia are among the state’s most booming markets. While South Carolina has many reasons to purchase housing, doing so isn’t always easy for buyers with nontraditional incomes.
Bank statement loans are a nontraditional loan type that helps small business owners and self-employed workers finance a property. If you’re considering purchasing a home or condo in South Carolina and earning income via self-employment, a bank statement loan may be right for your situation.
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Bank Statement Loans: Proving Your Income, Your Way
The bank statement home loan program makes it easier for those with nontraditional sources of income to qualify for a loan. Self-employed borrowers can use bank statement loans to prove income.
Traditional home loans require borrowers to show proof of income via pay stubs and tax returns. Self-employed workers don’t typically receive pay stubs, and tax returns aren’t always an accurate portrait of their borrowing power.
With a bank statement loan, you can prove your income your way. You can use personal and business bank statements to demonstrate income. Personal bank statements are used for personal expenses and bills. Business statements are used to collect income deposits and cover expenses. For many self-employed workers, income may be proven using a mix of both personal and business accounts.
Benefits of Bank Statement Loans in South Carolina
The bank statement home loan program benefits self-employed borrowers in many ways, including the following.
Ideal for Self-Employed Borrowers
The bank statement program is ideal for self-employed borrowers. As an asset-based loan type, it allows borrowers to prove income using assets (bank statements) rather than W-2s or tax returns. Most self-employed people, including small business owners, freelancers, independent contractors, and gig workers, can benefit from a bank statement loan.
No Tax Returns Required
Tax returns don’t always accurately demonstrate a borrower’s financial situation, especially as a small business owner or self-employed person. Self-employed workers qualify for tax write-offs in the form of business expenses, which can reduce qualifying income. In some cases, this can make it difficult to get approved for a loan.
Flexible Underwriting Guidelines
Bank statement mortgages tend to offer more flexible underwriting guidelines. Unlike traditional, conventional mortgages, lenders have more flexibility when it comes to determining an applicant’s eligibility. For instance, a lender may allow a higher down payment to account for a lower credit score or fewer assets.
Competitive Interest Rates
A bank statement loan offers more competitive interest rates than other non-traditional loan types. A lower interest rate can mean a lower monthly payment and less interest paid over the life of the loan. However, the interest rate is also affected by available assets, credit score, stated income, and the lender.
Can Be Used for Primary Residences, Second Homes, and Investment Properties
Bank statement income loans can be used to purchase various South Carolina property types, including a primary residence, second home, or investment property. As long as the borrower can demonstrate sufficient income to cover the monthly mortgage payments, they can use this financing for various property types.
Fast Processing
Underwriting and processing a bank statement mortgage can sometimes be faster than other loan types. Nearly all loan types require a verification of income, and with a bank statement loan, this step can be faster if the borrower has clear, detailed bank statements.
How Bank Statement Loans Work
Are you considering buying property in South Carolina using self-employment income? Here is what you can expect from the initial pre-qualification application to closing:
- Gather Your Documents – Gather your documents before submitting your loan application. You’ll need personal or business bank statements, proof of identity, and a list of assets.
- Get Pre-Qualified – Contact Pride Lending to get qualified. We offer an easy online process.
- Work With a South Carolina Realtor – After receiving pre-approval, you can begin shopping for your new South Carolina home.
- Complete the Approval Process -Once you receive an accepted offer, Pride Lending will start underwriting. This includes a final review of all personal or business deposits and checking that the borrower has the necessary funds to close the loan.
- Finalize the Sale – After completing underwriting, you’ll meet with your lender, realtor, and the seller’s team to close the sale. You will transfer the funds for the down payment and collect your keys.
Congrats! You’re a South Carolina homeowner!
How Many Months of Bank Statements Are Typically Required
You will usually need 12 or 24 months of bank statements to qualify for a bank statement mortgage. Most lenders accept both personal and business bank statements.
How Income Is Calculated
Bank statements allow lenders to determine borrowers’ ability to repay the mortgage. While the specific process depends on the mortgage lender, most add up all bank deposits over a 12 or 24-month period and then divide it by the number of months included. This results in an average monthly income, which is then used to determine loan approval, maximum loan amount, and interest rate.
What Types of Bank Accounts Are Accepted
Bank statement loan lenders typically accept most business and personal bank statements from a U.S. institution. However, bank account eligibility may vary depending on the lender.
South Carolina Bank Statement Loan Requirements
Here’s a brief overview of what you’ll need to qualify for a bank statement loan:
- A credit score of at least 620
- A down payment of 10% of the loan amount
- A debt-to-income ratio of between 45% and 55%
Minimum Credit Score
Most self-employed individuals will need at least a 620 credit score to qualify for a bank statement loan. Depending on the lender, a lower credit score may be permitted in return for a larger down payment.
Down Payment Requirements
Most borrowers will need at least a 10% down payment to qualify for a bank statement home loan. Self-employed borrowers with less income or a lower credit score may require a higher down payment.
Debt-To-Income (DTI) Ratio Considerations
Debt-to-income (DTI) ratio requirements for a bank statement loan depend on the lender but are usually between 45% and 55%.
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Eligible Property Types
Bank statement loan programs allow South Carolina buyers to purchase various property types. Here are some of the most common types.
Primary Residence
South Carolina is a great place to set down roots, and bank statement loans can help self-employed borrowers finance a primary residence. In South Carolina, a primary residence is a home where the borrower spends most of the year and pays taxes.
Second Home
A bank statement home loan can also be used to purchase a second home in South Carolina. Charleston, Myrtle Beach, Hilton Head Island, and Greenville are all great cities for second or vacation homes.
Investment Property
An investment property is a secondary property that the borrower uses to generate income through short- or long-term rentals. A bank statement home loan can be used to invest in real estate in South Carolina.
Tips for Applying for a Bank Statement Loan in South Carolina
Are you ready to apply for a self-employed bank statement loan? Here are a few tips to help you get started.
Organize Your Business Bank Statements
Borrowers will need between 12 and 24 months of bank statements to show proof of income. If possible, organize your bank statements to make deposits and expenses clear and easy to track. Separating your business bank statements from your personal accounts can also demonstrate clear business income.
Maintain Consistent Deposits
Consistent deposits tell lenders that you can afford the monthly mortgage payments. Try to maintain consistent deposits in your personal or business account to improve your chances of loan approval.
Prepare Additional Documentation
Business bank statements may be enough for some borrowers. However, you may also need to provide documentation to strengthen your loan application. Proof of other assets can show you have sufficient income to repay the mortgage. Providing evidence of assets also shows mortgage lenders that you can pay the down payment for your new home.
Other documents to prepare include statements for retirement accounts, business expenses, and business licensure.
Work with a Knowledgeable Mortgage Broker
Bank statement loans are non-qualified or non-QM loans. Non-QM loans mean the borrower doesn’t meet the requirements of a traditional loan. Not all lenders offer nontraditional loans, and even among those who do, it’s important to work with a lender with experience with the program.
Why Choose Pride Lending for Your Bank Statement Loan?
Pride Lending understands that traditional loan options don’t work for everyone. Self-employed buyers have traditionally struggled to qualify for a mortgage simply because they lack pay stubs and tax returns. Our team works with underserved and underrepresented buyers, helping them qualify for loans that make homeownership a reality.
We’re committed to making the home-buying process easy for South Carolina buyers. We’ll help you review available loans and choose the best program for your needs.
Get One Step Closer to Owning Your South Carolina Property With Bank Statement Loans
Make your dreams of becoming a South Carolina homeowner a reality with a bank statement home loan. Getting pre-qualification is easy with our streamlined application process. Have questions about the bank statement home loan program? Our team is here to help you every step of the way, from reviewing available loans to closing on your new home.
