In today’s world it is common for people to have non traditional income.  In the world of banks and lenders, traditional income is consider a pay stub and W2.

Your parents and grandparents lived in a world where you got a job, paycheck and pension and held onto it for 40 years.  Those days are gone.  Today’s world is filled with gig workers, side-hustles, independent consultants and 1099 workers. We have also seen an explosion in entrepreneurs and self employed borrower over the past couple generations.

These current borrowers do not receive a paystub and W2.  The lender world and banks, are slow to change.  Traditional guidelines still prefer to see paystubs and W2’s.  Banks will approve self employed borrowers but expect to see a few years of non complicated tax returns.

Enter into the market the Non-QM mortgage.  A Non-QM mortgage falls outside the traditional lending guidelines (Fannie Mae, Freddie Mac, FHA, VA).  On Non-QM loans, the traditional income documentation is not required.  Typically to offset the income documentation a slightly higher credit score and equity position than on a traditional mortgage is required.

These Non-QM mortgages are not the “Liar Loans” of the past.  Non-QM loans are for well qualified borrowers whose true income does not show through traditional methods.  In some cases a client may be able to fully document their income but prefer not to provide the endless stacks of tax returns and other documents.

With the bank statement loan, there are not income documents required at all.  A borrower does not need to provide personal or business tax returns, profit and loss statements, and letters from CPA’s among other items.  Depending on the loan structure the client will be asked to provide either 12 or 24 months business bank statements.

The lender analyzes the average allowable monthly business deposits.  Those deposits are used to calculate monthly income for qualification purposes.