Bank statement loans have taken over the traditional stated income loans as an alternative for borrowers who are unable to verify their income in the traditional way by providing the previous two years tax returns, W2s and pay stubs. These are non-QM loans, nontraditional loans or expanded criteria loans that allow other forms of documentation to prove the ability to repay. Just as it sounds, a bank statement loan allows the borrower to verify his or her income with bank statements.
These type of loans have provided a solution to borrowers’ challenge of using the net income claimed on their tax returns rather than the true net income that they make. This makes many borrowers ineligible for a loan. To apply for a bank statement loan, the self-employed borrower can provide the mortgage lender with as little as 12 months of bank statements which show regular deposits. This allows the lender to see how much you can afford to borrow. The lender would then verify your bank statements by calling your bank or by filling out a verification of deposit (VOD) request and mailing or faxing it to your bank. If you are using your business bank statements to qualify the lender will still need to see the expenses you incur as a result of owning a business but will not penalize you for expenses that you have written off on your tax returns.