Banks Statement Mortgage Loans For Self Employed Borrowers


Banks Statement Mortgage Loans For Self Employed Borrowers

This BLOG On Banks Statement Mortgage Loans For Self Employed Borrowers Was Written By Matt Herbolich MBA JD LLM CMLP NMLS 1649154 Of The Gustan Cho Team at USA Mortgage

There are a lot of self-employed borrowers who have been denied a mortgage loan due to negative income on their tax return. Matt Herbolich NMLS 1649154 of The Gustan Cho Team at USA Mortgage, a division of USA Mortgage is an expert in Banks Statement Mortgage Loans For Self Employed Borrowers. Many self employed borrowers have been having problems qualifying for mortgages since the 2008 real estate and mortgage meltdown:

  • They are denied a loan due to self-employment and the inability to prove their income.
  • Many self-employed individuals are faced with this issue.  
  • Being self-employed has its benefits.  
  • Although, there are drawbacks when it comes to qualifying for a mortgage loan. 
  • Business owners benefit from the many deductions from income that the tax law allows.
  • There is a caveat to the plethora of deductions.
  • When business owners and self employed borrowers are trying to qualify for a home loan there can be issues.
  • All of those deductions, which entrepreneurs benefited from, can be an obstacle to getting approved for a home loan.

How Banks Adjust Gross Income to Calculate Monthly Income

Many banks will use adjusted gross income.

  • This is the amount of income after all deductions have been allowed. 
  • For self-employed borrowers, this means that all deductions on ther federal income tax return will not be allowed as income. 
  • There are exceptions to things like depreciation and depletion expenses, which are added back to your adjusted gross income.
  • The annualized adjusted gross income from federal income tax returns is averaged out over 24 months to calculate monthly gross income.

Why Do I Need To Prove My Income If I Am Self-Employed?

When applying for a home loan, a bank will need to ensure that a borrower is able to repay the loan.

  • One of the most tell tale ways a bank can see if you are able to repay your loan is by using a calculation commonly referred to as the debt-to-income ratio. 
  • Borrowers will hear this term a lot when they are applying for a mortgage loan. 
  • The debt-to-income ratio is calculate by taking your total monthly debt, including house payment, and dividing this by the total monthly income. 
  • The total debt-to-income ratio allowed varies from bank to bank and depends upon the program in which you are qualifying. 
  • This is the reason why monthly income is so important when applying for a home loan. 
  • The bank needs to see how much house they can afford.

How Do I Qualify for Home Loan If My Self Employment Income Is Too Low?

There are many ways to qualify for a home loan if self-employed and unable to prove your income.

  • You can find a house that will keep your debt-to-income ratio within the bank’s underwriting criteria. 
  • This often means buying a smaller house, a house in a less desirable neighborhood, or a house that needs repairs.

Qualify For a Home Loan Using Bank Statements for Self Employed Borrowers

There is another way to qualify for a home loan using a program known as the 12 Month Bank Statement Program.

  • The 24 Month Bank Statement Program uses your average income based on average bank deposits over the last 24 months. 
  • The average deposits will then be decreased by your recurring monthly business expenses. 
  • The 24 Month Bank Statement Program enables self-employed borrowers to qualify for a home loan where they would not otherwise qualify for.

About the Author: Matthew Herbolich MBA JD LLM CMLP NMLS 1649154

Matt Herbolich NMLS 1649154 is partner of Gustan Cho Associates, a team of highly knowledgeable industry experts whose primary goal is the needs of the borrower.  Matthew Herbolich is an attorney by education and holds two law degrees: a JD degree from Case Western Reserve University and a LLM from the University of Miami but is a practicing licensed mortgage banker with USA Mortgage licensed in multiple states and partners with Gustan Cho in expanding The Gustan Cho Team at USA Mortgage consumer direct national business model at DAS Acquisition Company NMLS 227262. Call Us today at 530.813.0661 or email

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