Finding the right mortgage can be tricky, especially if you’re self-employed or have an alternative income source. That’s where 3-month bank statement loans come in. These specialized loans allow borrowers to qualify using just 3 months of bank statements, rather than extensive tax returns.
At my company, we’ve helped thousands of self-employed borrowers get approved with 3-month statement loans. So I want to share everything you need to know about these unique home loans.
What Are 3-Month Bank Statement Loans?
3-month bank statement loans, also called 12-week statement loans, are a type of alternative mortgage financing
With a traditional mortgage, you provide tax returns W-2s and pay stubs to verify your income. But for the self-employed, these documents don’t always show the full picture.
For example, your tax returns may show low income after you’ve deducted business expenses. Or your income may vary wildly from month-to-month, so a few pay stubs don’t reflect your true earning potential.
That’s where 3-month bank statement loans come in. Instead of looking at your tax returns, the lender reviews deposits from the last 3 months of your bank statements. This gives them a current snapshot of your earnings.
These loans are also known as “non-qualified mortgages” or “non-QM” because they don’t conform to Fannie Mae and Freddie Mac guidelines. As a result, they typically have higher interest rates than conventional mortgages.
Who Should Consider a 3-Month Statement Loan?
3-month statement loans are best suited for borrowers with alternative income sources, such as:
- Self-employed individuals
- Business owners
- Real estate investors
- Contractors
- Freelancers
- People with commissions/bonuses
You may also want to consider a 3-month loan if you:
- Haven’t been self-employed for 2+ years
- Have large business expenses lowering your taxable income
- Have inconsistent monthly income
These loans allow lenders to look at your current earnings, without getting tripped up by your specific tax/employment situation.
Requirements for 3-Month Statement Loans
While requirements vary by lender, here are some common eligibility standards for 3-month statement loans:
Credit score: Most lenders require a minimum credit score between 620-700. The higher your score, the better.
Down payment: Expect to put down at least 10-25% as a down payment. Loans with less than 20% down will require private mortgage insurance.
Income documentation: You’ll need to provide 12 weeks of personal and business bank statements. Some lenders may also ask for profit and loss statements.
Self-employment history: Many lenders require 1-2 years of self-employment in the same field. However, some may approve shorter histories with sufficient income docs.
Reserves: Expect to show 6-12 months of mortgage reserves (PITI payments) in your bank accounts. The amount required depends on your specific loan.
Debt-to-income ratio: Your total monthly debt payments, including the new mortgage, usually cannot exceed 43-50% of your gross monthly income.
Home equity: If you’re refinancing, you’ll need enough equity in your home to qualify for a cash-out or rate/term refi.
Loan limits: Most lenders cap 3-month statement loans around $2 million. Jumbo loans may be possible but come with tighter requirements.
As you can see, these loans take a deeper look at your financial situation instead of relying solely on tax returns. That’s key for self-employed borrowers.
How Do 3-Month Statement Loans Work?
Here’s an overview of the process when applying for a 3-month bank statement loan:
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Get matched with a lender. Not all mortgage lenders offer 3-month statement loans. Working with a mortgage broker is the best way to get matched with the right lender.
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Submit bank statements. Provide personal and/or business bank statements showing deposits for the last 12 weeks. Some lenders may also request profit and loss statements or other supplemental documents.
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Verify income. The lender will review your bank statement income and deduct expense assumptions to calculate your net qualifying income. For example, they may deduct 50% of deposits for expenses.
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Evaluate eligibility. The lender will look at your credit, income, assets, debt obligations and other factors to determine if you qualify. If you meet the requirements, you’ll get a loan estimate detailing your rate/fees.
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Submit loan application. Once you’ve chosen to move forward, you’ll complete a full application providing income/asset documentation, home details, and more.
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Get appraisal and underwriting. The lender will order a home appraisal and underwrite the loan. As long as everything checks out, you’ll get final loan approval.
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Close on your home! After finalizing your closing paperwork, you can pick up the keys to your new place!
It’s critical to find an experienced lender who can smoothly guide you through this alternative financing process.
Where to Find 3-Month Statement Loan Lenders
So where can you find mortgage lenders offering 3-month bank statement loans? Here are some options:
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Mortgage brokers: Brokers have access to multiple wholesale lenders and can help match you with the right 3-month statement loan. This is my #1 recommendation.
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Online lenders: Many online lenders like SoFi, LendingTree, and LoanDepot offer bank statement loan programs.
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Credit unions: Local credit unions are worth checking out. While less common, some do offer statement loan products.
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Portfolio lenders: Smaller portfolio lenders that keep loans on their books may offer 3-12 month bank statement loans.
The challenge is finding a lender who will look beyond the traditional criteria to approve your unique financial situation. An experienced broker is your best bet to get matched with the perfect bank statement loan.
Pros and Cons of 3-Month Statement Loans
Before applying for one of these alternative mortgages, let’s look at some of the key pros and cons:
Pros
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Qualify based on your current income using 12 weeks of bank statements
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Can close quickly with less documentation
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Ideal for self-employed and unconventional income sources
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More flexible qualifying compared to conventional loans
Cons
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Higher interest rates and costs compared to conforming loans
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Need excellent credit to get the best rates/terms
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Require significant down payment and reserves
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Limited availability from lenders
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Difficult to refinance into a lower rate loan down the line
For the right borrower, 3-month statement loans provide an opportunity to buy or refinance when traditional mortgage qualifying is difficult. But make sure you go in eyes wide open about the tradeoffs.
Alternatives to 3-Month Statement Loans
If you’re having trouble qualifying for a mortgage, 3-month bank statements loans aren’t your only option. Here are a few alternatives worth considering:
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FHA loans – More flexible qualifying for low down payments/credit scores.
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VA loans – 100% financing and flexible guidelines for veterans/military.
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Portfolio loans – Non-conforming loans held by banks/credit unions.
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Hard money loans – Asset-based financing from private lenders at higher rates.
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Owner financing – Some sellers may finance non-traditional buyers themselves.
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Loan boost programs – Down payment help for first-time buyers and borrowers in underserved communities.
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DSCR loans – Qualify using debt service coverage ratio based on rental income.
Some borrowers may combine programs, like a portfolio loan with down payment assistance, to get approved and buy their dream home.
The Bottom Line
Finding and qualifying for the right mortgage is the biggest hurdle to homeownership, especially when you don’t have a typical 9-to-5 job.
That’s when specialized 3-month bank statement loans can be ideal. They allow alternative-income borrowers the flexibility to qualify based on their current income.
Just make sure to work with an experienced lender who can source the right loan program for your situation. Rates and fees will be higher than conventional mortgages, but that tradeoff may be worth it to buy or refinance your home.
At my company, we’ve connected thousands of self-employed borrowers with the financing needed to become homeowners. So reach out if you have any questions about the process or want to discuss your specific scenario. Our team is here to help get you on the path to homeownership!
Can you get a bank statement loan if you’ve filed for bankruptcy?
You can get a bank statement loan if you’ve filed for bankruptcy, but there are a few caveats. For instance, you’ll need to wait at least two years to apply for any type of mortgage loan after bankruptcy, but there are some exceptions. For instance, mortgage lenders may be more lenient if you can afford a large down payment and higher interest rates.
Drawbacks of bank statement loans
Just like any other financing option, bank statement loans have drawbacks that are worth considering before you apply. Here are some of the most notable cons of bank statement loans:
- Must be self-employed for at least two years: One of the drawbacks for self-employed borrowers is that you have to be able to prove that you’ve been self-employed for two years—and if you haven’t quite reached that milestone, you’re out of luck and will have to wait. Exceptions are considered for business owners that have been in business for one year if you have at least two years of experience in the same line of work.
- Potentially higher interest rates: You may also have to contend with higher interest rates and down payments than more traditional loan options, but of course, this depends on your credit score and overall financial circumstances. That said, Griffin Funding strives to secure competitive interest rates for our customers.
- Minimal regulation: Since bank statement loans are a type of non-QM loan, they’re not regulated like traditional mortgages. This means mortgage lenders can take liberties when it comes to eligibility criteria.
At Griffin Funding, we aim to help our borrowers find the best loan options with favorable terms based on their individual circumstances.
Bank Statement Loans: What They Are and How They Work #Podcast
FAQ
Can I get a loan with just bank statements?
How do I get a 3 month bank statement?
How many months of bank statements do you need for a loan?
Are bank statement loans legit?
How many bank statements do I need to get a mortgage?
Typically, bank statement mortgage loans require 12 or 24 months’ worth of bank statements. However, in some cases, you may be able to get approved with only two month’s worth of bank statements. One of our loan officers will then manually review your bank statements and verify the information with your bank.
Do all mortgage lenders offer bank statement loans?
Not all lenders offer a bank statement loan program. So your options might be narrower than someone applying for a traditional mortgage or refinance. Below, we list a few mortgage lenders that explicitly offer bank statement loans. However, you shouldn’t limit your search to these companies.
Can I get a 3 month bank statement loan?
Let us connect you with a 3-month bank statement lender. Griffin Funding offers bank statement loans, but they typically want at least 12 months of statements. However, Griffin does mention on its website that individuals with as little as one to three months of statements may have enough to qualify.
What is a 6 month SOFR bank statement loan?
6 month SOFR bank statement loans are a type of Non-QM loan. While other bank statement loans have fixed rates, they will generally have higher interest rates than those you get with the introductory period of an ARM. In addition to 6 month SOFR BSL loans, we also offer 6 month SOFR DSCR loans, 6 month SOFR asset-based loans, and more.