Bank statement loans are awesome

I love bank statement loans. This has become a real path for self-employed borrowers in the last couple years. A bank statement loan ignores your tax return, doesn't matter, and looks at your bank deposits. Lenders will want usually 12 months, sometimes 24 months. Some lenders might even take three or six months of business or personal bank statements. And they just look at total deposits. They'll take an expense ratio somewhere between, call it 25 and 50% to estimate your actual income, and they use that number to qualify. This is much closer to revenue-based lending than profit-based lending. If your business grosses 600 and you write off half of it on taxes, the bank statement lender sees 600,000 in deposits, applies a 50% expense ratio, gives you 300K of qualifying income, but they got there from your real cash flow, not a tax return. And like I said in the earlier example, a $600,000 gross, you might write off 500 of it. You might only show 100 on your tax return. So, in this case, you're getting triple the income with a bank statement loan using a 50% expense ratio. For business owners who legitimately have strong cash flow, but tax-aggressive returns, this is a game-changer. The funny part is the trade-off used to be that rates were a lot higher on these loans. I've seen rates on these bank statement loans come down to almost be in line with what I saw on conventional loans. Sure, they might be a tick higher, sometimes a quarter a half a point, but not much higher. And the down payment minimums as well are 10% on a lot of these programs, whereas in the past, I think a lot of them required 20%. So, bank statement loans are getting more flexible, the rates are getting more competitive, they are a great loan. Bank statement loans are non-QM, which means they don't sell to Fannie or Freddie, so lenders keep them on the books and selling private. That's why pricing might be a little bit higher, but not much.