Bank Statement loanS: THEN & NOW

Bank Statements loans are making a HUGE comeback in the mortgage industry. Three years ago, 24-month bank statement programs were reintroduced into the mortgage market. These programs were different in that they only counted deposits that were regularly made quarterly or monthly. Large irregular deposits were not counted. This made the prediction of income more accurate because irregular deposits were thrown out of the total income calculation. This may have lessened the purchasing power of those that work in "gig" jobs, recently retired, or an independent contractor -- but it protected the public from another property downturn. Higher rates, higher fees, as well as a few major offerings of this product also helped to preserve equity.

Fast forward to today, and bank statement loans now make up over 3% of the total mortgage market. While this may seem small compared to the 1.3 trillion dollar mortgage market in 2018, it is four times larger than in 2017. As buyers with lower credit and difficult income become the only buyers left, more and more mortgage companies will come up with offerings that further expand the market, but the ability to repay rules will be swept aside. Expect to see large deposits count as income, expect to see lowering credit standards, more competitive rates on alternative products, adjustable rates, and for home prices to continue their march upward.

More opportunities for lending means more homeowners, which is a good thing -- until it's not. If you have any questions about the mortgage market and how it impacts you, feel free to give me call at 205.207.BEAR or send me an email at Joe@MortgageRight.com.