Bank Statement Home Loans In CA explained

Bank statement loan is a way to purchase a home using your bank statements. And the way we do that is by looking at your deposits in your bank account.

So typically what would happen is we would have a self-employed person who’s had their company more than two years, that’s 100% owner of the company. We look the business bank statements, and we add up all of the deposits, and then divide that by 24, and assign … And then once you have all of the deposits, then you have to prepare a profit and loss, which would usually be 20 or 25 percent of the total deposits. And that’s what you would use for qualifying income for someone to buy a house.

Usually, the bank statements are from one schedule C sole proprietorship or from one corporation. It’s preferably one bank account. We just did a transaction where we had two corporations and four bank accounts, and that was extremely challenging. Bank statement loans can be very challenging just because of the cumbersomeness of the nature of that loan. I mean, I know my business bank account has millions of dollars streamed through it every month, and is 50 pages long.

Just kidding. I don’t have millions going through my bank account, but I do have money going through my business bank account, and it’s like, I don’t know, 15, 20 pages long. So if I had to go take each bank account and put in the spreadsheet the deposit for 24 months, that’s a bit of a chore. And then in the odd deposits, anything out of the ordinary … let’s say I’m depositing $2,000, $2,000, 2,000, and then all of a sudden I deposited 30 or 40 thousand dollars. Well they’re going to look at that as kind of a red flag. Where is this money from? So it’s a little bit different.

Let’s see. Let me pause this music.

I … whenever I’ve evaluating these programs for clients, it’s kind of like you take it old school a little bit, because there’s so many different ways that you can go. And usually you need to put about 20% down. That’s very typical. 20% down. They have some programs out right now where you … newer programs where you can put 10% down, your credit score can be as low as 620, but that’s not the norm.

The norm is you need a 700 FICO, you’re putting 20, 30 percent down, you’re a pretty high-qualified borrower, you’ve got assets in the bank, you need reserves, your debt ratio’s around 45. So that’s the typical profile of someone that’s doing a bank statement program.

Not everyone fits a specific mold. And that’s where a lender’s ability to be creative and structure a file will come into play. That’s where I have success with my files, as opposed to someone that’s been turned down. It really just comes down to structuring. You know, really get in the think of it, knowing and understanding guidelines, and knowing how to package a file, and present it, right? It’s like a lot of things. It’s how it’s presented.

If it goes in a hot mess and it’s hard to look at, someone’s not going to want to give it attention. So you have to package it neat and pretty. It has to make sense, and overall I think that if something makes sense, oftentimes you can get it done, even if it’s out of guideline.

You know, some things you cannot … I mean some things, if they’re calling for 20% down and you only have 17, well then I don’t know what to tell you. You need 20%. But there are other things that you can vary a little bit, or you can just kind of slide in there.

Are you getting ready to leave?

Yeah.

Ah, come over here and say hi, Jocelyn, because you look so cure today.

This is Jocelyn, my partner.

Hey everyone.

So how about that last bank statement loan we did?

Yeah. That was … that was gnarly.

But we got it done, right? And there’s … through determination and being savvy and knowing how to talk to people-

Persistence.

Persistence, yeah. And these people were so highly-qualified. I mean, like incredibly qualified. But like a lot of self-employed people, they’re not necessarily showing all the income. And that’s exactly how a bank statement loan can benefit someone, is with that.

Jocelyn, why don’t you … so whenever we do these loans, we’ll put together scenarios for them. So why don’t you … so we did … OK. What is this one?

This one’s a 30-year interest-only ARM.

A 30-year. Oh it is?

Yeah. Five-one ARM.

OK. So

So a Five-one ARM is fixed for five years, and then it goes adjustable. And what was the … so this particular scenario, this was like a $1.2 million sales price. They put down 25%, so loan amount’s like $900,000, and their total payment is how much?

$5,358.

Versus $5,700 and $6,400 on these other scenarios.

So I was trying yesterday to do a screen share where you could see all this stuff. So this one is … and this is like old school, right? I’m all like scribbling on it, whatever.

So this is the five-year interest-only ARM. It does … these lonas aren’t free. It’s 1.375 points, and the rate on this one is 5.99. So obviously their are benefits to showing your income and yourself on qualifying. But a lot of times self-employed people, that’s just not how they operate.

So on this loan, five-year interest-only, it was $5,358. On this one, what was that payment?

40-year interest-only. $5,701.

So you could totally see it though, right? This works.

OK, so on this loan the rate was six and a half. But it’s spread out over 40 years and it is interest-only. And so the benefit for this type of loan over the five-year loan … so one’s 57 and one’s 53. But on the 40-year, it’s going to be like that for ten years, whereas the five-year’s going to be adjustable.

So this is a good loan for someone that’s thinking that they’re going to go back and do their taxes, right?

We do their taxes and refinance in like a year or two.

And then they 30-year fixed, that’s just kind of gnarly. It was $6,430 and the rate … does it show the rate? Six and a half. So the rate is … those are like 1990 rates, so to speak.

What are some things that you want to share about the program?

I mean like you said, it’s a great program for people that obviously own a business and you don’t show all your income in your tax returns, then when you’re self-employed, you always have those … you know, you have to pay so much taxes just to show the income that you really made.

So-

Right.

… it’s very cumbersome to try to buy a house. So if you can’t buy a house with your taxes, use your bank statements.

Now there are some stipulations. You know, you need to have proof that you’re paying rent. These investors are taking these loans on and  them with a specific set of guidelines. And we’re finding that … we’re finding that it’s pretty strict on the requirement that you show proof of payment of your residence. Also DTI. What do you think is the average DTI that we’re seeing on these?

For this one, it had to be below … was it 43?

On this one it was 43. But a lot of lenders, I think the norm is 45. And this is an area that you can kind of stretch outside of the box, so to speak, when you have a file that’s otherwise structured nicely.

Sometimes you can get exceptions to the debt ratios. What are some other things here?

Tell me about the reserves, Jocelyn.

You have to have at least six months’ reserves for this type of loan. So yeah you will get approved for it because you have all these deposits, but you still need to have something in your bank account to show that after six months, you’ll have enough money in the bank to make at least six payments.

And Billy Burke, no it’s not a liar’s loan. You know, this is a loan where the persons qualifying are legitimately vetted. You have to have a corporation or some kind of a business, and they validate that you actually have a real life business.

And then, you know, somebody that’s depositing 15, 20 thousand dollars on the regular, over 24 months I would say that person is a pretty good risk, and they’re putting 20 or 30 percent down. That’s a good risk, to me. And that’s paying anywhere from five and a half on the low to seven, seven and a half on the high on the rate.

So these investors, these big … and these are big investors. One of the companies that I’m dealing with, they’re getting a lot of their money from Dubai. Isn’t that kind of sexy?

So there’s a lot of investors looking to place money where the return is a solid six, seven, eight percent. And these loans, you know again when you’ve got a 700 credit score and you’re putting down 30%, you’re pretty invested and motivated to perform on that type of situation.

I can’t think of anything else. Let me see. Thought there were some more things. Self-employed for two years, reserves, rental history. Oh, the credit. So obviously if you’re trying to put 10% down and your credit is 620, you need to get your credit in order. And anytime you’re going to go buy a house or you’re going to refinance, getting your credit in order is paramount. That’s like number one. And there are a lot of really simple ways that you can get your credit scores up.

But if you’re looking to go do a bank statement loan with a 620 FICO, I would advise that yous pend 30 days getting your scores up, because if you got a 620, there’s some pretty easy ways to get your scores up. However, we are doing loans down to a 620. We’re doing loans up to two million. We’re doing credit scores down to 620, did I already say that?

Yeah.

OK. And bank statement loans with as little as 10% down. So that’s pretty sweet, wouldn’t you say?

Yeah.

Yeah. And we can close these in 30 days, too. So I just wanted to communicate to you all of the opportunities in lending that are out there for the self-employed borrower. I’ve been working with self-employers borrowers since 1998. You’ll know that I have a really good handle on evaluating their complex income needs.

Would you like to add anything, Miss Jocelyn?

No.

No?

You did a great job.

Alright. Well if you’re looking to buy or sell in Southern California, pick up that phone and give us a call at 909-920-3500.

Until next time.

It’s Friday night! OK.