Your Guide to Conquering the Peach State Housing Market with a Bank Statement Loan
If you’re someone who doesn’t work a traditional 9-to-5, you may have noticed how challenging it can be to qualify for a mortgage. This is where Georgia bank statement loans can be a lifeline – a way to qualify for a mortgage by simply providing your bank statements. Currently in Georgia, the self-employment rate is the highest it’s been in the past decade. If you’re self-employed or have difficulty proving your income through traditional means, you’ve come to the right place.
In this article, we’ll be covering everything you need to know about Georgia bank statement loans, so you can achieve your dream of homeownership if you’re someone who is self-employed, an entrepreneur, business-owner, freelancer etc. Shall we?
What is a Bank Statement Loan?
A bank statement loan is a type of non-QM loan (non-qualified mortgage) that uses a borrower’s bank statements rather than traditional income documents, like W2s, pay stubs, and tax returns, to assess their ability to repay the loan. To calculate how much home the borrower can afford, the lender adds up all of the deposits from the bank statements over a certain period of time and divides that amount by the number of months. This formula produces the average monthly deposit, which gives the lender a better idea of how much the borrower can afford to pay monthly.
Who is an Ideal Candidate for a Georgia Bank Statement Loan?
While there’s no exact “ideal” candidate for a Georgia bank statement loan, these loans can be beneficial for anyone who doesn’t have access to traditional income documents, like:
- 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
Bank Statement Loans vs. Conventional Loans: What’s the Difference?
Bank statement loans are non-QM loans (non-qualified mortgages) that use bank statements to assess the borrower’s ability to repay the mortgage. Non-QM loans aren’t required to follow the lending standards set by the Consumer Financial Protection Bureau (CFPB), which means that lenders can create their own requirements.
Conventional loans are QM loans (qualified mortgages) that use a borrower’s pay stubs, W2s, and tax returns to determine if they can repay the loan. Since conventional loans are QM, they’re required to follow the strict lending standards of the CFPB, making them much less flexible for those who have alternative sources of income.
What Are the Qualification Requirements for a Georgia Bank Statement Loan?
When it comes to bank statement loans, each lender sets their own qualification requirements. When you shop around for lenders, it’s a good idea to reach out to them directly to see what you would need to qualify. To give you an idea of what may be required, here are our bank statement loan requirements at Defy Mortgage:
- 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
Pros and Cons of Getting a Georgia Bank Statement Loan
Pros:
- Alternative income verification (no traditional income documents required, including tax returns)
- A wider range of people can apply
- Flexibility
- Faster approval process
- Potentially larger loan amounts
Cons:
- Limited availability
- Can sometimes have higher down payment requirements
- Potentially higher interest rates
Bank Statement Loan Alternatives for Georgia Borrowers
If you’re not completely sold on a Georgia bank statement loan, the beauty of non-QM loans is that there are plenty of flexible options for everyone. Below, we’ve listed a few bank statement loan alternatives that you could consider instead:
- Profit & Loss (P&L) Loans: Rather than using bank statements, these loans use your business’ P&L statements to determine eligibility. Ideal for business owners.
- Debt-Service Coverage Ratio (DSCR) Loans: These loans use a rental property’s income to see if it can cover the monthly mortgage payments, essentially “paying for itself”. Ideal for real estate investors or anyone who wants to purchase a rental property.
- Asset Depletion Loans: These loans use your liquid assets to calculate how much you can afford per month if you were to “deplete” your assets to pay for the loan. Ideal for high-net-worth individuals or anyone that has a large amount of liquid assets with low or no documented income.
- Interest-Only Options: These loans have an initial period at the beginning of the term where you only have to pay the interest portion rather than both interest and principal. During this initial period, the monthly mortgage payments are much lower than what they would typically be. Perfect for real estate investors, individuals who expect their income to increase in the future, and anyone who may want to redirect the monthly difference to other investments.
If you’re still unsure about which loan option may be right for you, contact us at Defy and we can walk you through it to find your perfect loan. We offer all of these loan options, and more!
FAQs:
- What is a bank statement loan?
A bank statement loan is a type of mortgage that uses bank statements to prove your income rather than traditional income documents like pay stubs, tax returns, and W2s. They’re typically used by self-employed individuals or anyone who has difficulty proving their income using the traditional income verification methods.
- How does a bank statement loan work?
To determine how much you can borrow with a bank statement, the lender will analyze your bank deposits over a certain period of time (usually 12 to 24 months). They do this by adding up all of the deposits and then dividing it by the number of months to calculate your average monthly deposits. Then, this number is used to see how much you can afford monthly as a mortgage payment.
- Is a bank statement loan a non-QM loan?
Yes, a bank statement loan is a non-QM loan (non-qualified mortgage), which simply means that it doesn’t follow the strict lending criteria that’s required by the Consumer Financial Protection Bureau (CFPB).
- Who should get a bank statement loan in Georgia?
If you live in Georgia and are self-employed or have difficulty proving your income using traditional income documents, you should consider getting a bank statement loan.
- Can I get a bank statement loan with bad credit?
Although not impossible, it could be quite challenging to get a bank statement loan with bad credit. Since bank statement loans are non-QM loans, each lender is allowed to set their own requirements, which include credit score. If you have bad credit, it’s recommended to reach out to different lenders to see if any are willing to accept your credit score.
- What is the minimum credit score required for a bank statement loan?
The exact credit score will vary by lender since each lender can set their own minimum credit score requirements. However, to give you an idea, at Defy we require a minimum FICO score of 620+ for our bank statement loans.
- Can I get a bank statement loan with no down payment?
No, most bank statement loans require some form of down payment.
- What are the down payment requirements for a bank statement loan?
Down payment requirements for a bank statement loan vary depending on the lender and your borrower profile – you can expect to pay anywhere between 10-30% down.
- Where can I get a bank statement loan?
You can get a bank statement loan from a private mortgage lender that offers non-QM loans, like us at Defy!
- What are the qualification requirements for a bank statement loan?
The qualification requirements for a bank statement loan can vary significantly between lenders, but to give you an idea of what you might need, these are our bank statement loan requirements at Defy:
- Minimum FICO score of 620+
- 12-24 months worth of bank statements
- Maximum LTV of 90%
- Maximum loan amount of $6M
- Interest-only option available
- What are the pros and cons of getting a Georgia bank statement loan?
Pros:
- Alternative income verification (no traditional income documents required, including tax returns)
- A wider range of people can apply
- Flexibility
- Faster approval process
- Potentially larger loan amounts
Cons:
- Limited availability
- Can have higher down payment requirements
- Potentially higher interest rates
- Are bank statement loans only available in Georgia?
No! Bank statement loans are available in a wide variety of states including, but not limited to, Texas, California, Tennessee, and more.
- Do banks offer bank statement loans?
Some banks offer bank statement loans, but not many. Lenders who specialize in non-QM loans are more likely to offer bank statement loans.
- What’s the difference between a conventional loan and a bank statement loan?
A conventional loan is a QM loan (qualified mortgage) that uses traditional income documents like pay stubs, W2s, and tax returns to determine income and eligibility, whereas a bank statement loan is a non-QM loan (non-qualified mortgage) that uses bank statements instead.
- How much do I need for a bank statement loan down payment in Georgia?
The exact amount you’d need for a bank statement loan down payment may vary, but you can expect to have to put down anywhere between 10-25%.
- Can I use a bank statement loan to buy a vacation home in Georgia?
Yes, you can use a bank statement loan to buy a vacation home in Georgia. If you are self-employed, bank statement loans make financing your vacation home a lot easier. Other non-QM loan options that you can use for your vacation home include interest-only options, profit and loss (P&L) loans, foreign national loans, and debt-service coverage ratio (DSCR) loans.
