Are you someone that is self-employed, or have an untraditional form of income and interested in purchasing a property, and concerned about qualifying for a mortgage because of your inability to provide certain paperwork to secure a mortgage? Even if you don’t have documentation that is required for most traditional mortgages, there are loan options available to help you finance a home. If you are located in Palm Beach, Tri-County, or Broward County, Florida, and have questions about your home loan options, CTC can help. Read on to learn more about the differences between a bank statement loan and a traditional mortgage.

Traditional Mortgages

A traditional, or conventional mortgage is a home financing option that is not insured through a government program, meaning a lender is not guaranteed compensation if the borrower is unable to make the loan payments. Therefore, traditional loans are deemed as more of a risk and usually have stricter lending requirements. Traditional loans require a borrower to make regular mortgage payments to repay the loan with interest over an agreed upon term. There are several benefits to obtaining a traditional loan, such as, they can have lower interest rates if the borrower has consistent income and good credit, and they offer a wide variety of loan types and terms. On the other hand, the higher credit score and stable employment history can pose a drawback for some borrowers. Additionally, the loan application process can take a lengthy amount of time and typically require a higher down payment amount. Traditional mortgages work well for buyers that have good credit and can afford a 20% down payment, which helps them avoid paying mortgage insurance. Due to recent trends in the real estate market, traditional mortgages are being impacted currently by rising interest rates, making loans more expensive.

Bank Statement Loans

While traditional loans focus on a borrower’s credit and employment income to qualify, bank statement loans let borrowers qualify for home financing by using a person’s bank statements rather than their tax documentation. Bank statement loans, sometimes called stated income loans, do not require a borrower to provide the typical paperwork that conventional loans require, such as tax returns. Instead, a lender will evaluate a borrower’s bank statements to verify income. This type of loan especially works well for borrowers who are self-employed or if they do not have consistent income, a borrower’s employer doesn’t use standard paychecks, or if a borrower claims substantial tax deductions. Bank statement loans offer more flexibility and have a faster processing time than traditional loans. If you are located in Palm Beach, Tri-County, or Broward County, Florida, and have questions about your financing options, contact CTC Mortgage today.

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