Bank Statement Loan vs. Regular Loan

Mike Head Shot9/3/2019- I hope you had a great weekend and I hope this week finds you happy and well.  It was a busy weekend for me with a couple of rounds of golf., a few clients and a lot of work that I think I am pretty caught up on.

So I was working on a file over the weekend where the client is about to file their 2018 taxes in October.  Last year they showed $71,000.00 in income as a self-employed business owner. To qualify for a property they want to purchase, they need to show $120,000.00 in 2018.  They have 20% down and can do the bank statement loan (bank Statements can be used with as little as 10% down), but they don’t want the higher interest rate.  LOL!  So I broke down the numbers of what they are paying in taxes based on the $71,000.00 and what they would be paying if they show $120,000.00 and then did the comparison of bank statement vs. regular loan!

If they file 2018 at $71,000.00 then they will have total state and Federal Taxes of approximately $6350.00.  If They show $120,000.00 then they would have to pay additional taxes of approximately $14,850.00 for a total tax bill $21,200.00.  Ok, so that may seem steep, but lets look at the real numbers.

If they qualify for the $800,000.00 Purchase Price with their taxes then their payment would be as follows: 30 Year Fixed Mortgage  $3009.52 + Property Taxes  $833.00 + Insurance $125.00 =  $3967.52

If they use their bank statements to buy the same house with the same purchase price then their payment would be  – 30 Year Fixed Mortgage  $3734.87 + Property Taxes  $833.00 + Insurance $125.00 =  $4692.87

So the $725.00 difference is a lot, but not quite $14,850.00 annually, but over the life of that loan it is HUGE savings!  Now these clients were in the same boat that many clients are in where they say well, I would need to take that extra $14,850.00 away from my down payment and that is fine because that raises the payment by about $160.00 with PMI and a bigger loan amount.  They can lower their income again in 2019 and beyond too!  Just food for thought as we approach the October 15 tax deadline.

Interest rates slid again over the past couple of days and they look great.  Below are rates based on a 740 Credit score and rates are subject to change without notice:

  • 30-year fixed conventional 1st Mortgage with 25% down – 3.500% (3.547 APR). Loan amounts up to $484,350.00 = $2174.95
  • 15-year fixed conventional 1st Mortgage with 25% – 3.000% (3.084 APR). Loan amounts up to $484,350.00 = $3344.83
  • 5/1 ARM 1st Mortgage –  25% down – Fixed for 5 years and then becomes variable – 3.500% – (3.594 APR) Loan amounts up to $3,000,000.00 = $13,471.34
  • 7/1 ARM 1st Mortgage – 25% Fixed for 7 years and then becomes variable – 3.625% – (3.714 APR) Loan amounts up to $3,000,000.00 = $13,681.54
  • 10/1 ARM 1st Mortgage – 25% Fixed for 10 years and then becomes variable – 3.750% – (3.844 APR) Loan amounts up to $3,000.,000.00 = $13,893.47
  • 30-year fixed 1st Mortgage FHA loan 3.50% down – 3.250% (4.663 APR). Loan amounts up to $484,350.00 = $2144.81 + $349.08 PMI = $2493.89
  • 30-year fixed 1st Mortgage VA loan 0% – 3.250% (3.296 APR). Loan amounts up to $484,350.00 = $2107.92
  • 30 Year Fixed rate 1st Mortgage Jumbo Loan 25% down – 4.250% (4.344 APR).  loan amounts up to $3,000,000.00 =14,758.20

I will be in the office all week and we are here to serve you and your clients.  Please let me know if you have any questions and if I am not available then please leave me a message or ask for one of my teammates.  I have Dwayne Okpaise, Kris Kehl, Whitney Sengthao, Anna Higgins, David Bogosian, and Irma Arteaga that are all licensed Loan Officers on my team.  They are hardworking, smart and they see more files in a month than most Loan Officers do in a year!  Our office line is  661-260-2970 and my cell is  661-714-6258.   Have a great day and I hope to hear from you soon!