Getting a mortgage can be difficult, especially if you are self-employed, earn commission-based income, or have experienced recent financial hardships. 3 month bank statement loans are an innovative mortgage solution designed to help borrowers who may not qualify through traditional lending channels. In this comprehensive guide, we will explain what 3 month bank statement loans are, who they are best suited for, and how the application process works.
What Are 3 Month Bank Statement Loans?
3 month bank statement loans allow borrowers to qualify for a mortgage based on 3 months of personal or business bank statements rather than tax returns, pay stubs, and other traditional income documentation
With a 3 month bank statement loan the lender reviews deposits going into your checking account to determine your income rather than demanding pay stubs or tax returns. As long as you can show consistent deposits from a verifiable source, you may qualify even if you are self-employed a 1099 contractor, have rental income, commissions, bonuses, or irregular income streams.
Who Are 3 Month Bank Statement Loans Best Suited For?
3 month bank statement loans are an excellent option for
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Self-employed borrowers – Business owners, entrepreneurs, contractors, and freelancers who do not have traditional W-2 pay stubs.
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Borrowers with commission or bonus income – Real estate agents, sales professionals, executives with irregular commissions.
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Borrowers with rental income – Real estate investors and landlords who collect rental income.
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Borrowers with recent financial hardships – Applicants who have experienced late payments, foreclosure, bankruptcy, or other credit challenges in the past few years.
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Borrowers who need to close quickly – Applicants who need financing fast for a short sale, auction purchase, or timely opportunity.
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Borrowers with tax return complications – Business owners who strategically minimize taxable income or have write-offs.
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Foreign nationals – Non-resident aliens who need U.S. financing to purchase investment property.
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Applicants with alternative income sources – Borrowers with income from royalties, trusts, or other unconventional means.
How Do 3 Month Bank Statement Loans Work?
The 3 month bank statement loan process is straightforward:
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Step 1) Contact a lender that offers 3 month bank statement loan programs and fill out a quick pre-approval application.
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Step 2) Provide 3 months of recent personal or business bank statements. The lender will review deposits to verify your income.
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Step 3) Complete a full application with income, employment, and asset documentation. The lender will evaluate your DTI and cash reserves.
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Step 4) Get appraisal and undergo full underwriting. After approval, head to closing and get the keys to your new property!
Lenders will require a minimum down payment, typically 10-20% depending on your specific scenario. 3 month bank statement loan programs are available nationwide for loan amounts up to $3 million.
What Are The Benefits of 3 Month Bank Statement Loans?
Some of the biggest advantages of 3 month bank statement loans include:
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Fast approvals – Can close in as little as 14 days since lengthy income documentation is not required.
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Higher qualifying income – Lenders count 100% of personal deposits and up to 90% of business deposits as income.
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Flexible guidelines – Approvals with current late payments, recent credit events, and higher debt-to-income ratios.
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No tax return required – Eliminates headaches for borrowers with complicated returns.
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Verifies all income sources – Captures income not shown on taxes like cash payments.
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No minimum FICO score – Opportunity for borrowers with credit challenges to qualify.
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Purchase and refinance – Use for buying a home, cash-out refinancing, or debt consolidation.
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Lower payments – Competitive rates and programs with only 10% down.
What Are The Drawbacks of 3 Month Bank Statement Loans?
As with any mortgage program, there are some potential disadvantages:
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Higher interest rates – Interest rates typically 0.5 to 1% higher than conventional loans.
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Larger down payment required – Typically a 10-20% down payment is expected.
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Limited purpose use – Cannot be used for building a home or construction projects.
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Reduced loan amounts – Maximum approval limits around $3 million. Jumbo loans above this amount may not qualify.
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Requires solid reserves – Lenders look for 3-12 months of mortgage payments in liquid reserves.
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Ineligible properties – Unique properties like co-ops and manufactured homes may not qualify.
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Higher origination fees – Upfront fees around 1-3% of the loan amount to offset added risk.
What Are The Qualifying Criteria For 3 Month Bank Statement Loans?
While programs vary slightly between lenders, here are some general eligibility guidelines:
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Down payment – Typically 10-20% down required depending on specifics of your application.
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Minimum FICO score – No minimum score required, but most lenders look for 620+ for approval.
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Income documentation – 3 months of personal or business bank statements.
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Self-employment – 1-2 years minimum time in business may be required.
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Property type – Single family home, condo, townhome. Multi-family and commercial properties generally not allowed.
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Reserves – 3-12 months of mortgage payments in liquid reserves.
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Debt-to-income – DTI up to 50% or higher may be approved.
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Bankruptcies – Minimum 2 years since discharge required.
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Foreclosure – Minimum 3 years since event required.
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Loan amount – Up to $3 million. Loan minimums around $75k.
Finding The Best 3 Month Bank Statement Loan Lender
The lender you choose can make or break your home buying experience. Here are some tips for finding the right lending partner:
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Verify they offer 3 month bank statement loans – Not all lenders have this product. Search for “3 month bank statement loans” or “asset based lending”.
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Ask about down payment options – Some lenders allow 5% down to help you buy sooner.
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Inquire about time in business requirements – If you recently started your business, find a lender with lower experience requirements.
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Compare interest rates – Rates from 5.5% to 8% available depending on your specific qualifications.
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Look for low fees – Closing costs from 1 to 3% of loan amount. Opt for lower.
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Read online reviews – Choose a lender with satisfied past customers and few complaints.
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Check for responsive support – You want a lender who is easy to reach and transparent.
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Make sure they have fast turnaround – Look for banks that can close loans in 14-21 days.
The Bottom Line
3 month bank statement loans open mortgage financing to entrepreneurs, real estate investors, self-employed borrowers, and anyone with an irregular income stream. If you have struggled to get approved for a home loan, need to close quickly, or want to avoid complicated tax return analysis, a 3 month bank statement loan may be the ideal solution.
Bank Statement Loan Success Story
Ricardo is an excellent example of how a bank statement loan can help someone who is self-employed or who owns their own business. Ricardo, as a successful self-employed construction worker, had a healthy and regular income each month, but after writing off his expenses, he was unable to report sufficient income to qualify for a traditional loan.
Thanks to a bank statement lending program, Ricardo was able to apply for a bank statement loan without having to show his tax returns, which meant that his business write-offs were not a problem. Ricardo’s monthly income bank deposits over the past 12 months were enough to qualify him for a bank statement loan. His bank statement showed:
- January: $5,250
- February: $4,200
- March: $3,500
- April: $8,400
- May: $9,500
- June: $5,300
Ricardo had a six-month average income of around $6,000 per month. After reviewing a full year of Ricardo’s bank statements, the lender was able to approve a loan based on that amount.
Although the down payment and interest rate were slightly higher than a traditional loan, Ricardo was happy to be able to purchase a home. What’s more, he could always return the following year and, if he could report an increase in income, he would have the option of refinancing with a conventional loan, which could have a lower interest rate.
What credit score do I need for a bank statement loan?
A credit score is one of the basic bank statement loan requirements for every lender.
Having a higher credit score is a good way to improve the chances of approval and keep your interest rates low on any type of mortgage including a bank statement loan. In order to qualify for bank statement loans with Griffin Funding, borrowers need a credit score of 620 or higher.