Why Is a New 12-Month Bank Statement Loan Such a Big Deal?
We now have a loan that only requires 12 months of personal bank statements for income verification.
This is such a big deal because it is another indication of how flexible the non-QM market is getting.
This loan uses the aggregate of deposits into a personal account for income. Other bank statement loans require 24 months of statements, business statements, and/or expense ratio calculations (that limit income).
This loan also allows for credit scores as low as 620 and down payments as small as 10%.
It is an excellent loan for self-employed and gig-economy borrowers whose tax returns (or even W2s) don’t adequately reflect all of their income.
Loans like these are why we can now find excellent financing options for a huge percentage of borrowers whose only option would have been “hard money” as recently as a few years ago.
Should I Wait for Rates to Fall Before Locking?
We hear that question repeatedly every week, as borrowers always expect rates to fall for one reason or another.
They especially expect rates to fall when there are rumblings of a Fed cut.
First of all, rates usually do NOT fall after the Fed cuts the Fed Funds Rate, as I explain in this short blog:
3 Reasons Mortgage Rates Don’t Always Fall When The Fed Cuts Rates.
More importantly, NOBODY knows what will happen in this unprecedented environment – with so much debt and such significant government and central bank intervention.
In 2022 and 2023, most prominent pundits and economists were calling for recessions and lower rates, and all were wrong.
They didn’t anticipate the massive government stimulus we saw as well as the reliance on leftover COVID stimulus and savings.
Today’s environment is equally nebulous.
Mr. Trump Can’t Have It Both Ways
Mr. Trump wants a very hot economy and much lower rates, but truly hot economies always result in higher rates.
This is because, once again, the bond market (that sets long-term rates, not the Fed) always responds to inflation and growth expectations.
And strong growth means higher rates. And I would not put it past Mr. Trump to copy Mr. Biden’s stimulus play – should things slow down.
So, even though I expect rates to fall still in response to cooler inflation and a weak labor market, I would never bank on it.
I still remember all the borrowers who “waited for rates to fall further” in the fall of 2024 – only to miss out entirely on the low rates available in September.
And again, if rates do fall later on, borrowers can refinance more easily than ever.
