Bank Statement Loans

Instead of relying primarily on traditional tax-return income calculations, eligible borrowers may qualify using deposits shown on personal or business bank statements.

Potential Benefits

• Tax returns may not be required for eligible programs
• Designed for self-employed borrowers and business owners
• Income may be calculated using eligible bank deposits
• Personal or business bank statements may be accepted depending on the program
• May help borrowers whose tax returns show lower taxable income because of legitimate business deductions
• Various property types and loan amounts may be available

Things to Consider

• Generally requires a larger down payment than traditional Conventional financing
• Credit requirements and pricing vary by program
• Business expenses may be considered when calculating qualifying income
• Documentation requirements vary by lender

Profit & Loss (P&L) Loans

Some Non-QM programs may allow eligible self-employed borrowers to qualify using a Profit & Loss statement prepared or supported according to the program's requirements.

This can be useful when traditional tax-return income doesn't accurately represent the borrower's current business cash flow.

• Tax returns may not be required for eligible programs
• W-2s and traditional paystubs may not be required
• Designed primarily for qualifying self-employed borrowers
• Current business income may be considered
• Higher down payment and stronger credit may generally provide better financing options

Do Business Write-Offs Reduce Your Qualifying Income?

Many self-employed borrowers have substantial legitimate business deductions that reduce the taxable income shown on their tax returns.

That doesn't necessarily mean you can't qualify for a mortgage.

Depending on your circumstances, a Bank Statement, P&L, or other Non-QM program may provide an alternative way to document qualifying income.

DSCR Loans

A DSCR (Debt Service Coverage Ratio) loan is designed for real estate investors and generally focuses on the rental income and expenses of the investment property rather than the borrower's traditional personal income.

This can be an attractive option for investors who want to qualify without using W-2 income, paystubs, or personal tax returns, subject to the applicable DSCR program guidelines.

Key Benefits of DSCR Loans

• No traditional employment income required for qualifying under eligible DSCR programs
• W-2s and paystubs generally aren't used to establish qualifying income
• Personal tax returns may not be required
• Qualification is primarily based on the property's rental income compared with its housing expense
• Designed specifically for real estate investors
• Available for purchase and refinance transactions, subject to program requirements
• Cash-out refinance options may be available
• Can be useful for investors who own multiple rental properties
• Properties may be held in an LLC or other eligible business entity, depending on program requirements
• Long-term and certain short-term rental properties may be eligible depending on the lender/program

How DSCR Works

DSCR compares the property's qualifying rental income with the applicable monthly property expense.

For example:

Monthly qualifying rent: $3,000
Monthly PITIA: $2,500

DSCR = 1.20

A ratio of 1.00 generally means the qualifying rental income equals the applicable property expense. A ratio above 1.00 indicates that the qualifying rent exceeds that expense.

Things to Consider

• DSCR loans generally require a larger down payment than owner-occupied Conventional financing
• Higher credit scores and stronger DSCR ratios may provide better financing options
• Rates and fees are generally higher than comparable traditional Conventional financing
• Minimum DSCR requirements vary by lender and program
• Some programs may permit a DSCR below 1.00, but typically with additional restrictions or different pricing
• Property eligibility, reserves, loan amount, credit, experience and other requirements vary by program

Built for Real Estate Investors

Whether you're purchasing your first rental property or expanding an existing portfolio, a DSCR loan can provide an alternative way to finance investment properties without relying on traditional employment-income qualification.