Everyone knows that Private Mortgage Loans are more flexible and easier to attain than a traditional mortgage. Aside from the property, one of the key documents reviewed when using private lenders are the bank documents.
The 4 Keys when reviewing bank statements are…
3. Irregular Activity
What do we mean by consistency? Most assume we are referring to income. Income verification will come into play in some cases but not all. In situations where the total mortgage to the property value is low, income isn’t important. For the Self-Employed, the bank statements are a true reflection of income, simply because many Business Owners pay themselves less on paper for tax benefits. We understand that too. A private mortgage can be structured to where mortgage payments are paid upfront from the proceeds, providing a property owner/borrower the ability to get affairs in order before the mortgage comes due. So whether someone is on EI, Social Assistance or some other form of Government Assisted income; bank statements are still required.
NSFs (Non Sufficient Funds), aka Bounced Cheques are costly to an account holder, but it provides great insight on an individual’s ability to manage their funds. With a traditional lender, it can definitely “kill” your application, but with a private mortgage that isn’t the case. We understand that in most cases someone that is in need of private money is seeking financial relief. Most Private Lenders understand that NSFs will happen, but once it becomes frequent or if unexplained; it can turn a bad situation into an ugly one. It can hinder your ability to refinance with a traditional lender.
Monthly payments that do not match up with your credit application are a huge red flag. Be honest when completing your application. The moment that an unexplained irregular activity is found, it can either trigger an instant decline OR more information will be requested to support the claim. Typically, a credit report shows all payments due to creditors, but some don’t. In essence, it’s best to have a good tab on your overall debt story, because you don’t want a Lender to misinterpret and reach their own conclusion.
This is an important one. For example; if you state that you can’t make ends meet, the bank statements will definitely shed light on your spending habits. If you eat out regularly, frequent the local liquor store, or have consistent spending at casinos; it may be a cause for concern. Bad spending habits can at times be overlooked when there is significant equity in the property, because it warrants the risk. A private lender is willing to take a chance on a property owner, but it needs to make sense.
If you are looking for private money, ask yourself if your bank statements are a reflection of your situation. Be honest. It’ll save everyone time and get your loan request processed faster. If you are somewhat consistent in your daily living, have explainable NSFs, normal bank activity, and you find yourself to be of good character; a private mortgage is definitely within reach. Of course, the property needs to be a fit. Contact Amansad Financial for our common sense approach and see how we can help you out.