Texas has a long and proud history of homeownership, and the mortgage industry has evolved over the years to make it easier for borrowers. In the Lone Star State to find the best financing options for their needs. One of the most popular mortgage products that have grown in popularity in recent years is the bank statement mortgage. These types of mortgages offer a viable alternative for those who don’t have the traditional sources of income that lenders typically require. This article will explore the power of bank statement mortgages in Texas and discuss their benefits, how they work, and more.
What Is A Bank Statement Mortgage?
A bank statement mortgage in Texas is a type of home loan that is based on the income that a borrower has received over the past 12 months. Instead of relying on traditional sources of income such as a W-2 or pay stubs. The lender uses a borrower’s bank statements to verify their income. This is a great option for self-employed borrowers who may not have traditional income sources, as well as those who are paid in cash.
Why Should You Consider A Bank Statement Mortgage?
A bank statement mortgage is ideal for those who don’t have traditional sources of income. This type of loan is also a great option for those who are self-employed and may not have the same income every month. Additionally, bank statement mortgages are often more flexible than traditional loans. Allowing for lower down payments and allowing borrowers to use assets such as stocks and bonds as collateral.
How Do Bank Statement Mortgages Work?
The process for applying for a bank statement mortgage is similar to that of a traditional mortgage. The borrower will fill out an application and submit their bank statements for the past 12 months. The lender will then evaluate the borrower’s income and creditworthiness, and if approved, will offer the borrower a loan.
Tips For Getting Approved For A Bank Statement Mortgage
When applying for a bank statement mortgage, it’s important to be prepared. Here are a few tips to help you get approved:
- Be sure to submit accurate bank statements that reflect your income over the past 12 months.
- Be prepared to provide additional documents such as tax returns, business licenses, and other financial documents.
- Have a down payment of at least 20% of the home’s purchase price.
- Have a good credit score.
- Don’t take on any new debt before applying for the loan.
Types Of Bank Statement Mortgages
- Fixed Rate Mortgage: A fixed rate mortgage is a loan in which the interest rate remains the same throughout the entire term of the loan. With this type of loan, the principal amount and the interest rate remain fixed for the duration of the loan’s term, regardless of market fluctuations.
- Adjustable Rate Mortgage (ARM): An adjustable-rate mortgage (ARM) is a loan with an interest rate that can change periodically. The initial interest rate on an ARM is typically lower than a fixed rate mortgage, however, the interest rate and payment can go up or down over time.
- Interest-Only Mortgage: An interest-only mortgage is a loan where the borrower pays only the interest on the loan each month. At the end of the loan term, the borrower must pay the full balance of the loan.
- Reverse Mortgage: A reverse mortgage is a loan for seniors age 62 and over that allows them to access the equity in their home without having to make payments. The loan accrues interest over the life of the loan, and the borrower does not have to repay the loan until the home is sold or the borrower moves out of the home.
Understanding Requirements For Bank Statement Mortgages
Before applying for a bank statement mortgage, it’s important to understand the requirements. Generally, lenders require borrowers to have a minimum credit score of 620. Have a down payment of at least 20% of the purchase price, and have a debt-to-income ratio of 43% or less. Additionally, the borrower must have a 12-month history of consistent income.
Advantages Of Bank Statement Mortgages
Bank statement mortgages offer a number of advantages for borrowers in Texas. These include:
- The ability to get approved for a loan without traditional sources of income.
- Lower down payments.
- More flexible credit requirements.
- The ability to use assets such as stocks and bonds as collateral.
Conclusion
Bank statement mortgages offer a great option for those who don’t have traditional sources of income. They are also a great option for self-employed borrowers and those who are paid in cash. With the right preparation and understanding of the requirements, borrowers in Texas can unlock the power of bank statement mortgages and find the financing that’s right for them.