Self-employed borrowers are eligible for either personal bank statement documentation or business bank statement documentation to verify consistent, qualifying income. The following requirements apply to both documentation types:
- Borrowers must be self-employed for at least 2 years and business must be in existence for at least 2 years.
- Non-permanent Resident Aliens and Foreign Nationals are ineligible.
- All parties listed on each bank account must be included as borrowers on the loan.
- Up to 3 NSF checks and overdraft protection transfers in the most recent 12-month period are allowed with explanation from the borrower.
PERSONAL BANK STATEMENT PROGRAM
- 24 months or 12 months complete bank statements
- 100% of deposits, averaged over 24 months or 12.
- Transfers between personal accounts should be excluded
- Transfers from a business account into a personal account are acceptable
- Unusual deposits must be documented
- Borrowers will qualify off the lower of the following:
- Income figure listed on Signed 1003
- Personal Bank Statement Average (total deposits [minus any disallowed deposits] 24 months or 12 months)
BUSINESS BANK STATEMENT PROGRAM
- 24 or 12 months complete business bank statements
- One of the following is needed:
- Borrower prepared P&L covering same time period as the bank statements.
- Expense statement prepared by CPA or licensed tax preparer
- Business bank accounts, personal bank accounts addressed to a DBA, or personal accounts with evidence of business expenses can be used for qualification.
- Wire transfers and transfers from other accounts must be documented or excluded.
- Borrower must be minimum 50% owner of business.
- Business expenses must be reasonable for the type of business (examples of business with higher expense ratios may include construction companies, builders, restaurants and retail firms).
- Statements should show a trend of ending balances that are stable or increasing over time.