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: 85%
The loan to value shows that the minimum down payment is 15% as of today. Not a huge change from the 10% down payment it used to be and once again can be expected to get back up to that mark once we out of the current market uncertainty.
Minimum credit score: 660
Credit score changes have been one of the biggest changes to the program. They were at a score of 620 as a minimum 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 75%, 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 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.
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