The majority of our self-employed clients have the credit scores, assets and cash flow required to service a mortgage debt, but cannot qualify for a mortgage. It’s largely due to the fact that self-employed individuals document and deduct a vast array of expenses, resulting in taxable income that’s too low to qualify for a mortgage loan. (For example, home office expense, health insurance, continuing education, retirement savings, self employment taxes, depreciation, depletion, amortization, etc.).

The solution: a Bank Statement Loan. Our Bank Statement Loan is simply a mortgage product that determines the borrower’s ability to pay by evaluating the amount of cash flowing through their bank statements. We’ll consider business bank statements, personal bank statements, or a combination of the two. If you’re self-employed and your spouse receives W-2s, we’ll undertake a hybrid qualification. Note: We don’t need tax returns (even on a hybrid qualification).

We’ve noticed that many self-employed clients who select this product do not have a lack of taxable income. Sometimes applicants just prefer mortgage products that do not require tax returns.

In terms of qualifying, we typically require two (2) full years of self-employment. (FYI, we do have a version of this product that only requires one [1] year). We’ll total your deposits for the past 24 months, calculate the average, apply an expense factor relative to your industry, and derive your monthly qualifying income.

Appearing in Exhibit 1 (below) is an Income Worksheet from an associate who is self-employed with commission based income. He utilized SLGs Bank Statement Mortgage to buy one of those gorgeous brand new open concept homes in Riverside County! He gave us permission to use his actual monthly commissions during a 24 month time frame to demonstrate the efficacy of Bank Statement Mortgages for the self-employed. 

So, to understand how the income is underwritten, here’s Exhibit 1: