The bank statement home loan is back in action with a few updates due to market conditions. Prior to the health crisis, the bank statement home loans were very comparable to a conforming, high balance and jumbo loan. With the impacts in the market these programs completely went away for a short time but are now back. That said, they are a bit different than before with changes to the loan to value (LTV) allowance, Credit score requirement and income calculation. All of that considered, they are still a viable option for the business owner and self employed 1099 employee.
Current bank statement home loan requirements:
Maximum loan amount: $4,000,0000
The max loan amount prior to the program change was as high as $10,000,000! Now, for additional risk purpose, they have been reduced to $4,000,000 but are expected to increase as everything gets back to normal.
Maximum loan to value: 90%
The down payment requirement has improved to only 10% down. This change is a great indication that secondary markets have gained their confidence back in these programs. As confidence increases, the program will continue to improve. That said, 10% down was the minimum prior to the health crisis so there would have to be some big changes to lower the down payment required any further.
Minimum credit score: 620
UPDATE: Credit score changes have been one of the biggest to the program. They are now allowing a score of 620 as a minimum which is as low as they have ever allowed. The change not only effects borrowers with lower credit scores but also those who are looking for a high LTV who have a lower credit score. Currently, the highest LTV with the minimum credit score is 80%, 10% lower than the max allowed.
Income calculation: 12 to 24 month bank statements or 1099 only
The 12 to 24 month bank statement requirement has not changed but the actual income that can be counted and how that is calculated has. Before a prepared P&L or a letter from a tax preparer was enough to establish a borrower’s expense percentage. Now there are industry adjustments to the expense percentage. Depending on the industry the borrower is in and number of employees they have determines the minimum expense.
- If a borrower is a realtor, which typically has a low overhead, they can only count 90% of the total income deposits regardless if the true expenses is only 5%.
Bottom line: This is going to continue to improve
The program requirements are changing on a regular basis. To stay up to date on these and all other programs. Send me an email and I will get you subscribed to my newsletter where I provide program updates regularly.
Ask me about our True stated income program. No bank statements, no P&Ls, no 1099s, no W-2s
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Valor Lending Group
“Pride in Lending”
Diamond View Tower
350 10th Ave – 10th Floor
San Diego, CA
Direct: (619) 535-9324
Fax: (619) 255-0602