Today, many people earn money that is harder to document compared to an income that is earned through a traditional employer. Whether you are a start-up business owner, gig economy worker, or independent contractor, having more control over how and when you work is beneficial up until the point where you need to provide proof of your income.
Many people who earn a non-traditional income hit a standstill when they try to apply for loans to buy a house or manage other essential aspects of their lives. While most lenders prefer to see a W-2 or tax return, this might not be to your advantage. In some cases, it might even be impossible to show your income this way. As someone who is self-employed, you'll want to know about the benefits of using bank statement program loans to help you get the funding you need for major purchases.
Skip Having to Ask for a Co-Signer
With your independent mindset, you may prefer to avoid having to ask your family member or a close friend to co-sign on a loan. Some people prefer not to involve people in their financial decisions, or you may not even know anyone who could co-sign for you. As long as you have a good credit score, a record of stable income, and a low debt-to-income ratio, you'll have a good chance at qualifying for this type of loan without having to ask someone else for help. Since you'll prove your income using your bank statements, you'll have the information that a lender needs to make a decision on approving the loan.
Simplify Verifying Your Income
Lenders tend to look for a pattern of regular payments to determine your ability to pay back a loan. While someone who receives a steady paycheck might be able to produce a month's worth of pay stubs, this might be more challenging if your business income tends to fluctuate according to market trends or certain times of the year. Self-employed bank statement loans will usually require you to show one to two years' worth of bank statements. Being able to show how the income accumulates throughout the year makes it easier to explain why your most recent month might be lower than normal but that it evens out overall.
Avoid Getting Dinged for Tax Breaks
Many lenders ask for tax returns to prove income, but this may not reveal how much you really make. If your business is fortunate enough to receive tax breaks, or you have a lot of expenses one year, then your adjusted gross income might not look as good as it should. With a bank statement, lenders can get a better sense of your real net worth. While they'll still need to look at the expenses, they'll be able to consider if they are a one-time event as they make their decision.
To learn more, contact a company like Blake Mortgage.Share