Bank statement loans can be a great way for freelancers, entrepreneurs, gig workers and self-employed people to make their homeownership dreams a reality. Often called “self-employed mortgages,” these loans are unique in that they require no tax returns, no pay stubs and no employment verification — only bank statements that prove you can make your monthly payment.
They’re versatile, too. Not only can you use them to purchase your home (new, old, first, second, third or even vacation or investment property), but you can also use them to tap your home equity or refinance your current mortgage (if you already own a home).
Are you considering a self-employed mortgage loan to achieve your financial goals? Here are some ways you might consider using one:
1. To buy a home.
First and foremost, bank statement loans can be used to purchase a home. This can be your first home, a trade-up home, or even a second home or vacation property. In some cases, you may even be able to use these loans on an investment property — one you’re considering renting out on either a short-term basis (think Airbnb or VRBO) or to annual tenants.
2. To refinance your existing loan.
If you already own a home and have an existing mortgage loan, you can also use a bank statement loan to refinance. These loans are particularly helpful if you’ve started freelancing, launched your own business or otherwise become self-employed since you first bought the property.
Why would you want to refinance? There are several reasons existing homeowners refinance. The first is to lower their monthly payment. If market interest rates are lower than the one on your current loan (or your credit has greatly improved since applying for your mortgage), a refinance might garner you a lower interest rate and therefore a lower monthly payment. It will also help you save on interest in the long run.
You also might want to refinance to change the term of your loan. If your income has gone up, you could refinance to a shorter-term loan (say 10 years instead of 30). This would increase your monthly payment but allow you to pay off your loan faster and save on interest costs. If you need to lower your monthly payment, you might want to refinance into a longer-term loan to spread out your remaining balance.
Finally, a refinance is also beneficial if you currently have an adjustable-rate mortgage. Though adjustable-rate mortgages (or ARMs, as they’re often called) come with lower interest rates up front, those rates change after a period of 3, 5, 7 or sometimes 10 years. If you’re approaching the time when your rate can fluctuate, refinancing into a fixed-rate loan can protect you from potential interest rate and monthly payment increases.
3. To tap equity in your home.
Bank statement loans are also an option for cash-out refinancing. Put simply, a cash-out refinancing replaces your existing mortgage with a loan of a higher balance. You then get to keep the difference between those two loans in cash, which you can put toward whatever expenses you choose.
Many homeowners use cash-out refinancing to pay for things like repairs, renovations, major remodeling projects or even non-home related items like medical bills, their child’s college tuition or a new vehicle.
What Can a Bank Statement Loan Help You With?
Are you considering a bank statement loan to achieve your homeownership or financial goals? Then contact a loan expert at Sunray Mortgage today or read our Guide to Self Employed Mortgages. We believe in the power of self-employed mortgages, and we’re happy to help guide the way.