If you make your money in a non-standard way, then you need to know about bank statement loan requirements.
Why? When self-employed workers, freelancers, and others with non-traditional income sources want to buy a home, traditional lenders can’t always see their true worth—because their tax returns won’t show their actual income.
But there’s a popular solution available—bank statement loans.
These loans offer a flexible alternative to conventional mortgages. They allow borrowers to qualify based on bank statements rather than traditional income documentation.
Understanding the main bank statement loan requirements can help make the application process smoother and less stressful.
Get started with a bank statement loan with Lendistry Home Loans.
The top five bank statement loan requirements
- Consistent and sufficient income
- Strong credit score
- Low debt-to-income ratio
- Significant down payment
- Clean and comprehensive bank statements
Below, we’ll look at each in greater detail—plus a bonus factor—to help you understand what you need to meet the requirements successfully.
Consistent and sufficient income
Lenders offering bank statement loans rely primarily on your bank statements to assess your income.
They will review your deposits over a specified period, usually between 12 and 24 months, to determine your average monthly income.
The consistency and amount of these deposits are crucial factors in the lender’s decision-making process.
Why it matters
Consistent and sufficient income demonstrates your ability to repay the loan. Lenders want to see regular deposits that reflect stable earnings.
Irregular or insufficient deposits may raise concerns about your financial stability and repayment capacity.
Tips for meeting income requirements
- Organize your bank statements: Ensure your bank statements are well-organized and clearly show your income deposits.
- Highlight recurring deposits: If you have regular clients or sources of income, make sure these are easily identifiable in your bank statements.
- Maintain consistent deposits: Avoid large gaps between deposits, indicating income instability.
Strong credit score
While bank statement loans are more flexible regarding income documentation, your credit score remains a critical factor—lenders use to assess your creditworthiness and financial responsibility when reviewing your credit report.
Why it matters
A good credit score indicates to lenders that you have a history of managing your finances responsibly. Usually, this translates into better loan terms and interest rates.
Tips for meeting the strong credit score requirement
- Check your credit report: Request and review your credit report regularly, correcting any errors or omissions you may find.
- Pay bills on time: Timely payments are the primary factor influencing your credit score—late payments lower scores.
- Reduce debt: Reducing debt can enhance your credit score, making your application more attractive to lenders.
Low debt-to-income ratio
The debt-to-income (DTI) ratio is how much you spend each month on your debts.
Lenders use your DTI ratio as part of the process to determine your ability to manage additional debt.
Why it matters
A low DTI ratio demonstrates that you have enough consistent income to cover your existing debts and any new mortgage payments—a healthier balance between your income and debt obligations.
Tips for meeting the low debt-to-income ratio requirement
- Paying debts: Reducing your current debt can lower your DTI ratio.
- Increase your income: Increasing your income through additional work or business growth can help improve your DTI ratio.
- Avoid new debt: Before applying for a bank statement loan, don’t take on new debt. It can change your DTI and impact your loan eligibility.
Significant down payment
Bank statement loans commonly require a larger down payment compared to traditional mortgages.
While conventional loans might require a down payment as low as 3%, bank statement loans typically require a down payment of at least 10% or more.
Why it matters
A significant down payment reduces the lender’s risk by ensuring you have substantial equity in the property from the start of the process.
It also demonstrates your financial commitment and ability to save, which are positive indicators for lenders.
Tips for meeting the down payment requirement
- Save diligently: Start saving early to accumulate a larger down payment.
- Consider alternative sources: Look into gifts from family members or borrowing from retirement accounts as potential sources for your down payment.
- Cut unnecessary expenses: Reducing discretionary spending can help you save more effectively for your down payment.
Clean and comprehensive bank statements
Lenders will scrutinize your bank statements for red flags, such as large, unexplained deposits, frequent overdrafts, or insufficient funds.
Clean and comprehensive bank statements that clearly show your income and financial activities are fundamental to a successful application.
Why it matters
Clear and well-documented bank statements give lenders a transparent view of your financial health.
This documentation can help build lender confidence that you’ll be able to repay the loan successfully.
Tips for meeting bank statement requirements
- Avoid large, unexplained deposits: Ensure all deposits can be explained and documented.
- Maintain sufficient funds: Keep a healthy account balance to avoid overdrafts and insufficient funds.
- Organize documentation: Keep detailed records of your income sources and financial activities to provide clear explanations if needed.
Bonus tip: transparency and communication
This is not a bank statement loan requirement, but it can make a big difference.
Lenders appreciate borrowers who are upfront about their financial situation and willing to discuss any potential concerns or irregularities in their bank statements.
By proactively addressing any questions the lender might have, you can build trust and potentially improve your chances of securing the loan.
Moreover, regular communication ensures that you are aware of all the requirements and any additional documentation needed, helping to avoid delays in the approval process.
Establishing a strong rapport with your lender can also lead to better loan terms and a smoother overall experience.
Applying for a bank statement loan? Lendistry Home Loans is ready to help you get started.
Understanding and meeting the key requirements for bank statement loans can significantly improve your chances of securing this type of financing.
By ensuring consistent and sufficient income, maintaining a strong credit score, keeping a low debt-to-income ratio, saving for a significant down payment, and providing clean and comprehensive bank statements—you can position yourself as a strong candidate for a bank statement loan.
If you’re ready to apply for a bank statement loan, start your application process by visiting Lendistry Home Loans.
Our bank statement loan experts team can guide you through the process today.