Bank Statement Loan Credit Score What Lenders Look For

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Bank statement loans work well for many freelancers, business owners, gig workers, and any other home buyer who’s self-employed.

These loans work so well because bank statements show all your income — not just your income minus work expenses, which is what lenders see when they see only your income tax returns.

Even when you document higher income, bank statement loan approval isn’t guaranteed. You’ll still need to meet your lender’s bank statement loan credit score minimum.   

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What is the minimum credit score needed for a bank statement loan?

You can find a bank statement loan with a minimum credit score of 600, which is even less than you need for a conventional loan.

Bank statement lenders can make their own rules, so they can offer lower minimum scores. With traditional borrowing, lenders must comply with investors, insurers, or government agencies when it comes to setting minimum scores. With bank statement loans, lenders keep most, or all, of the loans on their books. 

And, you might be surprised that you need just a 10% down payment for one of these loans, and mortgage insurance is not required.

Example lenders with low credit score requirements

Making their own rules for bank statement loans creates stricter qualifying rules for many borrowers, but it can work the other way too. Lenders can relax their qualifying criteria when they don’t have to conform to national standards. 

The following bank statement loan lenders tend to look more favorably on borrowers with lower credit scores.

My Perfect Mortgage lender network

My Perfect Mortgage maintains a network of lenders that offer the best bank statement loans for lower-credit applicants.

Products include:

• Bank statement 2nd mortgages
• 1099 only
• No-doc (approval based on LTV, credit and liquidity)
• 1 year self-employed, bank statements only

If you need help finding a lender, submit your loan scenario and we’ll match you with the best lender for your situation.

It’s difficult contacting numerous lenders to see if each one can accommodate your needs. That’s why we take that job off your plate so you can get the financing you need.

Truss Financial

Truss Financial is a mortgage broker that matches outside-the-box borrowers with lenders who can meet their needs.

Truss will take loan applicants with FICO credit scores of 650 or higher, down payments as low as 10%, and debt-to-income ratios as high as 50%. Loan sizes can reach up to $4 million, and you’d need to show up to 24 months of bank statements to prove income.

For a bank statement loan, qualifying with a credit score of 650 with only 10% down is a sweet deal. Most lenders would require 20% down or more with a score below 700.   

NASB

North American Savings Bank, or NASB, can approve bank statement loans with 15% down and credit scores as low as 680. 

Along with the higher down payment and higher credit score, NASB’s debt-to-income ratio is a little more strict than Truss Financial’s. NASB looks for a DTI of 45%.

Still, compared to lenders that require credit scores in the 700s to put less than 20% down, NASB’s rules are easier to meet. Plus, you could submit only 12 months of bank statements to NASB. 

American Financing

Self-employed borrowers with credit scores as low as 600 could get approved for a bank statement loan with American Financing. This is great news for self-employed borrowers with average credit. 

But there are still some hurdles to approval. You’d need to put 20% or more down with a score as low as 600. Plus, American Financing will ask for extra documentation which could include a client list or verification from a certified public accountant.  

Dream Home Financing

Dream Home Financing is another online broker that specializes in non-conventional loans. Dream Home says it can match borrowers who have average credit with lenders who can approve them. Some lenders can offer down payments as low as 10%.

But there’s no guarantee your low-credit-score application would be approved. Like Truss Financial, Dream Home doesn’t lend money; it helps borrowers find ideal lenders for their situations.   

What a better credit score will get you

A few lenders will approve bank statement loans with lower credit scores. But limiting your shopping options to a handful of lenders makes it harder to find a great deal. A better approach? Try to increase your credit score before borrowing.

By raising a score in the 600s to 720 or higher, you’d have more bargaining power. You may be able to find a bank statement loan with:

• Lower down payment: Rather than putting 20% or more down, you could likely pay only 10% down with better credit. For a $400,000 home, that’s $40,000 less in upfront cash 
• Higher DTI rules: If your monthly budget is too tight, lenders will limit the size of your loan. A higher credit score can loosen DTI guidelines for borrowers with tight budgets
• Lower interest rates: Lower credit scores require higher interest rates, and higher rates mean bigger monthly payments for the same house. Plus, this bigger payment drives up DTI
• Lower, or no, PMI: Private mortgage insurance can add hundreds to your house payment each month, but this insurance coverage protects your lender. Better credit means lenders need less protection and, therefore, less (or no) PMI 

So how do you get a higher credit score?

• Get rid of negative credit data: Check your credit reports for errors at annualcreditreport.com. Dispute any and all errors.
• Add new, positive credit data: Make on-time payments on your other debt, pay down your credit card balances, keep credit accounts open even after you pay them off if possible.

Most people need months, a year, or maybe longer, to see credit score improvement. But others can achieve a fast turnaround, especially if errors have driven down their score. 

Bank statement loans and derogatory credit

A recent foreclosure or bankruptcy in your credit history can complicate your application even if you have great credit and lots of income. The answer: Waiting a few years before applying.

For traditional loans, the waiting periods range from two to seven years. For non-QM bank statement loans, waiting periods after a derogatory credit event will vary by lender.

The good news: Some non-traditional lenders don’t require a waiting period at all. If you’re worried about a recent credit event, ask your loan officer before applying. You may be able to write a letter of explanation to address your lender’s concerns. 

Bank statement loan credit score FAQ

Should you get a bank statement loan?

If you’re self-employed and need a reliable way, other than tax forms, to document your income, a bank statement loan could be perfect for you.

With a credit score of 720 or higher, you can compare offers from dozens of lenders. 

With a credit score in the 600s you’ll have fewer options. But there’s still a good chance you can find a great deal by applying with the right lenders.