Bank Statement Tips

Bank statement loans have become a "normal" doc type in NonQM. MLO's should develop a series of questions, like an interview, to help themselves, and the borrower, determine the bank statement options. There are two bank statement types; personal and business accounts. Typically, business bank statements are the most used and have the highest approval rate.

The key factors to consider in bank statement underwriting are; 1) source of deposits and 2) the consistency of deposits in timing and dollar amounts. Large deposits are often excluded as normal income and backed out of the deposit count.

An example of this is; A fitness trainer that has 15 regular paying clients paying at each session, weekly or monthly. This establishes; consistency in the payment pattern, dollar amount and source (meaning the paying client).

Ask your borrower these questions;

1) Do you use a personal or business checking account? If your borrower uses a personal account but runs all business income/expenses, ask about a "co-mingled" option.

2) Do you have any business partners, or sole? If the borrower has a partner (50/50 ownership), your borrower will be credited 50% of the net income.

3) What name(s) are on the statements? This is important to know. If a spouse is on the statements, he/she needs to be on the loan.

4) Where and how is your business paid (example above). If deposits are inconsistent and the source of deposits is hard to identify, this will create extra work to document.

5) Are your deposits consistent or inconsistent?

6) Do you have a business license or other document to prove self-employment?

7) Do you work with a licensed tax preparer or CPA? If so, you might be able to use a P&L-only option. Check your product guides. Also, you may be required to obtain a business expense letter from a licensed preparer.

8) How long have you been self-employed? (you need to prove 2 years of self)

9) Do you have more than one business? This is allowed and a good thing.

10) If so, do you have other checking accounts for the business? Income is a good thing, make sure to add all businesses you need, or can prove out as income.

11) Any NSF's in your statements? If so, check your guidelines for max allowed NSF's

12) Do you normally have transfers between accounts? If so, this might be an issue as transfers aren't allowed unless the transferred money is from an account owned by your borrower. Often, #9 above is often the case.

13) Does your business have a physical address? If so, are the addresses on your bank statements the same? Make sure your 1003 matches up to this info.

14) Are you paid 1099 by any chance? If so, there are doc type options for 1099 only.

Be comfortable "interviewing" your self-employed borrower. You will build trust and confidence in asking these questions, but most importantly, figure out early on if the bank statements will be allowed to be used. Nothing wrong with a quick "no."

Tarik Taeha

I.D.C. INTERGRATED DEVELOPMENT CONSORTIUM

2 年

https://sfyimby.com/2022/11/design-approved-for-1517-e-street-sacramento.html Design Approved for 1517 E Street, Sacramento sfyimby.com ? 2 min read https://sfyimby.com/2023/02/construction-expected-soon-for-2016-nest-walk-sacramento.html Construction Expected Soon for 2016 Nest Walk, Sacramento sfyimby.com ? 2 min read

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