A Complete Guide to Alabama Bank Statement Loans for the Self-Employed
Whether you’re a self-employed entrepreneur or someone with a unique income stream, achieving your homeownership dreams in Alabama can feel out of reach with a traditional mortgage. It can often be tricky to prove your income when you’re self-employed, but it doesn’t necessarily mean you’re making any less than someone working a 9-5 job. Mobile, Alabama is one of the top 30 cities in the U.S. where self-employed individuals out-earn the median income by an average of $10,681.
For those who don’t have traditional income documents, Alabama bank statement loans offer an alternative way to recognize your hard-earned income. In this guide, we’ll be exploring everything you need to know about Alabama bank statement loans. Let’s get into it!
What Is a Bank Statement Loan?
A bank statement loan is a type of home financing option that allows you to qualify with your bank statements instead of traditional income documents, like W2s, pay stubs, and tax returns. Due to this alternative income verification method, bank statement loans are considered to be non-QM loans (non-qualified mortgages). This simply means that these loans do not have to follow the strict lending standards set by the Consumer Financial Protection Bureau (CFPB).
Who Should Get a Bank Statement Loan In Alabama?
If you’re having trouble qualifying for a conventional loan due to your income and have a bank account with regular deposits, you should consider getting an Alabama bank statement loan. They can be a great home financing option for those who are:
- Entrepreneurs
- Gig workers
- E-commerce Professionals
- Individuals With Multiple Streams of Income
- Influencers
- Freelancers
- Consultants
- Independent Contractors/1099
- Small Business-owners
- Self-employed Lawyers and Doctors
- Artists
- Real Estate Investors
- Truck Drivers
How Do Bank Statement Loans Work in Alabama?
When you provide the lender with your bank statements, they calculate your average monthly deposit by adding up your total deposits for the period and then dividing them by the number of months. Once they have this figure, they can easily calculate the maximum mortgage amount you can afford based on your income.
Where Can You Get an Alabama Bank Statement Loan?
You can get Alabama bank statement loans from private mortgage lenders, as well as some banks and credit unions. However, for specialty loans, private mortgage lenders who specialize in alternative lending products, like Defy, tend to have more experience with them. Choosing an experienced bank statement lender can significantly speed up the closing process and you can feel confident with their guidance.
Alternatives to Alabama Bank Statement Loans
One great thing about non-QM loans is that there’s something for everyone, so if you think a bank statement loan doesn’t work for you, there are plenty of other options.
Below, we’ve listed some other non-QM loans to consider:
- Profit & Loss (P&L) Loans: Use your business’ P&L statements to qualify for a loan.
- Asset Depletion Loans: Use your liquid assets to qualify for a loan.
- Debt-Service Coverage Ratio (DSCR) Loans: Use rental property income to qualify for a loan.
If you’re still shopping around for the perfect loan, Defy can help! We have all of these loan options and more to help you find the right fit. Contact us today to schedule a free consultation.
Alabama Bank Statement Loan Requirements
The requirements for an Alabama bank statement loan can vary greatly between lenders. When shopping for lenders, it’s important to ask them what’s required, so you can prepare for the application process.
While we can’t speak for other lenders, here are our bank statement loan requirements at Defy to give you an idea:
- Minimum FICO score of 620+
- 12-24 months worth of bank statements (personal or business)
- Maximum LTV of 90%
- Maximum loan amount of $6M
- Interest-only options available
Alabama Bank Statement Loan Interest Rates
Several factors affect bank statement loan interest rates, such as the lender, your qualifications, and the current market rates. Despite those factors, bank statement loan interest rates tend to be slightly higher than conventional rates. Higher rates may not be ideal, but they can be worth it for the opportunity to get exposed to the housing market.
Bank Statement Loans vs. Conventional Loans: What’s the Difference?
Bank statement loans are non-QM loans that use bank statements to determine an applicant’s monthly average income for qualification. These loans work well for those who are self-employed or have a non-traditional income stream that make it difficult to qualify for a conventional loan.
Conventional loans, on the other hand, are QM loans (qualified mortgages) that use an applicant’s traditional income documents, like W2s, pay stubs, and tax returns, to see if they qualify. These loans tend to have stricter requirements compared to bank statement loans, but they can be a good choice for those with strong documented income.
Pros and Cons of Getting an Alabama Bank Statement Loan
Pros:
- Opportunity to become a homeowner if you can’t qualify for a conventional loan
- Qualify using bank statements
- No tax returns or other income documents required
- Faster closing process
- Flexible loan terms
Cons:
- Can have slightly higher interest rates
- Slightly higher minimum down payment requirements
- Limited availability
Alabama Bank Statement Loan FAQs:
- What is a bank statement loan?
A bank statement loan is a type of home loan that uses your bank statements as a method of income verification instead of traditional documents, like W2s, pay stubs, and tax returns.
- How does a bank statement loan work?
When a lender reviews your bank statements, they calculate your monthly average deposits by adding up every deposit during the period and dividing it by the number of months. This number gives lenders a good idea of how much home you can afford.
- Can anyone get a bank statement loan?
Yes! Anyone who has a bank account can get a bank statement loan. They’re not limited to only individuals who are self-employed or have non-traditional income streams.
- Who would be an ideal candidate for a bank statement loan?
While anyone can get a bank statement loan, they’re typically geared towards those who are:
- Entrepreneurs
- Gig workers
- E-commerce Professionals
- Individuals With Multiple Streams of Income
- Influencers
- Freelancers
- Consultants
- Independent Contractors/1099
- Small Business-owners
- Self-employed Lawyers and Doctors
- Artists
- Real Estate Investors
- Truck Drivers
- What are the qualification requirements for an Alabama bank statement loan?
Qualification requirements for Alabama bank statement loans depend on the lender. At Defy, this is what we would require:
- Minimum FICO score of 620+
- 12-24 months worth of bank statements (personal or business)
- Maximum LTV of 90%
- Maximum loan amount of $6M
- Interest-only options available
- Can I get a bank statement loan with bad credit?
While it could be more difficult to get a bank statement loan with bad credit, it’s definitely possible. Every lender sets their own credit score requirements, meaning there could be a lender out there who’s willing to accept bad credit.
- What are the credit score requirements for an Alabama bank statement loan?
Credit score requirements are set by each lender, but at Defy, we require a FICO score of 620 or above.
- Can you get an Alabama bank statement loan with no money down?
No, you most likely will not be able to get an Alabama bank statement loan with no money down.
- What’s the minimum down payment for an Alabama bank statement loan?
Most lenders require at least 10% down and this minimum down payment will also depend on your qualifications. You can expect to put anywhere between 10-25% down for an Alabama bank statement loan.
- Do I need to provide tax returns for a bank statement loan?
No, tax returns aren’t required to qualify for a bank statement loan.
- Are bank statement loans in Alabama hard to get?
No, they’re typically easier to get than a conventional loan since there’s less paperwork involved.
- Do I have to be self-employed to get a bank statement loan in Alabama?
No! Anyone who has access to a bank account that has regular deposits can get a bank statement loan in Alabama – even if you’re a W2 employee.
