Bank Statement Loan Florida

What a bank statement loan is and who it serves

Bank statement loans are a type of non-QM (non-qualified mortgage) loan. They sit outside the standard Fannie Mae, Freddie Mac, FHA and VA rules, so each lender writes its own guidelines. The common thread is that income is calculated from deposits into your personal or business accounts, not from the adjusted gross income on your tax return.

The usual borrowers are business owners, independent contractors, real estate agents, consultants, tradespeople and gig workers. Many of them earn well and write off a lot, which is legal and sensible for taxes and a problem for conventional underwriting. A contractor whose net income on the return is a fraction of gross deposits, after depreciation, vehicle costs and equipment purchases, will qualify very differently under the two approaches. The same person, the same business and the same cash flow can be approved for a much larger loan on statements than on returns.

This isn't legal or tax advice. Talk with your CPA before you change how you report income to qualify for a loan, because what you tell a lender and what you tell the IRS need to tell the same story.

How lenders turn deposits into income

The underwriter adds up eligible deposits over the statement period and divides by the number of months. Then they adjust:

• Personal statements: usually most deposits count, after removing transfers between your own accounts, loan proceeds and other non-income money.
• Business statements: the lender applies an expense factor, a fixed percentage assumed to be business costs, or uses a CPA- or tax-preparer-prepared expense letter or profit and loss statement. A service business with low costs can often document a lower expense ratio than the default.
• Large deposits: anything unusual for your account needs a source. Expect to explain one-time payments, transfers from relatives or sales of assets.
• Declining deposits: if the recent 12 months are much lower than the prior 12, the lender may use the lower figure or decline.

Most programs want at least two years of self-employment history, shown by a business license, a CPA letter or state registration records. Florida business filings with the Division of Corporations are an easy way to show how long your company has existed.

Down payment, credit and reserves

Because these loans carry more risk for the lender, they ask for more from you. Expect a larger down payment than a conventional loan, often in the 10% to 20% range depending on credit score and loan size, with stronger terms at higher down payments. Credit scores matter a great deal; each tier changes pricing. Lenders also ask for reserves, meaning months of mortgage payments left in the bank after closing.

On a Florida home at the statewide typical value of $375,361, 10% down is about $37,500 and 20% down about $75,000, before closing costs. On a condo near the statewide condo value of $262,592, the same percentages are roughly $26,300 and $52,500. Non-QM lenders also review condo associations, and a building with weak reserves or pending litigation can be harder to finance with any loan type.

What it costs compared with a conventional loan

Rates on bank statement loans are higher than conventional rates for the same borrower profile, and pricing depends heavily on credit, down payment and documentation type. Fees can include origination points and a prepayment penalty on some products. Ask every lender for a full Loan Estimate so you can compare the annual percentage rate, cash to close and any prepayment terms side by side.

Florida closing costs apply on top of the loan. On the mortgage, buyers pay documentary stamp tax on the note of $0.35 per $100 and intangible tax of 0.2% of the loan amount. On a $300,000 loan that is $1,050 in note stamps and $600 in intangible tax. Title insurance, the appraisal, lender fees and prepaid insurance and taxes come next. Florida homeowners insurance is a bigger line than in many states, so get a quote early, because it affects your debt-to-income ratio.

Other non-QM options for self-employed buyers

Bank statements are one path. Others worth asking about:

• 1099 loans: income based on 1099 forms for contractors paid that way, often with a simpler expense calculation.
• P&L only loans: a CPA-prepared profit and loss statement stands in for statements or returns.
• Asset depletion or asset qualifier: income is imputed from liquid assets, which suits retirees and business sellers with large balances and little monthly income.
• Conventional with recent returns: if your most recent tax year shows higher income, a standard loan may now work and will usually cost less.

A good loan officer will run you through more than one option. If they only offer one product, get a second opinion.

Step-by-step: getting approved in Florida

• Gather statements: download 12 and 24 months of every account you deposit business income into, all pages, including blank ones.
• Clean up transfers: know which deposits are income and which are transfers, refunds or loans before the underwriter asks.
• Get a CPA letter: it should confirm your self-employment, ownership percentage and, if useful, your expense ratio.
• Get pre-approved, not pre-qualified: have the lender actually review your statements before you make offers.
• Price insurance early: roof age, wind mitigation and flood zone change premiums, and premiums change what you qualify for.
• Write a clean offer: sellers in Florida see plenty of financed offers; a full underwriting pre-approval and a realistic financing deadline make yours look like a conventional one.

When a bank statement loan makes sense and when it doesn't

It makes sense when your tax returns understate what you can comfortably pay, you have solid credit and savings, and the extra cost is a price you are willing to pay to buy now. Many borrowers refinance into a conventional loan later, once two years of returns support it, so check any prepayment penalty before you sign.

It makes less sense if a conventional loan is within reach with a little more documentation, or if you are stretching to the top of what deposits allow. A higher rate on a budget that is already tight leaves no room for Florida's insurance and tax surprises. Once you know what you qualify for, a shortlist of homes that fits that number keeps the search realistic.