Which Borrowers Benefit from the Lite Doc Solution?
Sometimes business owners just cannot meet the rigors of the traditional refinance paperwork requirements. In these cases, commercial property owners would need to look elsewhere for the finance they need to meet a balloon payment, rejuvenate their operations with a renovation project, or even additional property acquisition. The following borrowers are a perfect fit for the Lite Doc Solution.
Self-Employed Borrowers
Banks deny self-employed borrowers at extremely high rates when they apply for a commercial property refinance loan. During tax season, the way borrowers report income can seriously affect their chances at qualifying for a commercial loan. While individuals who work under an employer have a collection of pay stubs and receive a W-2 form at the end of the year reflecting their total earned income, self-employed professionals file their taxes differently and don’t have access to these documents. That’s when a bank statement program is helpful because a borrower won’t need to provide tax returns to show proof of income. Instead, they can provide bank statements (generally 6 to 12 months) to the lender as income verification.
Borrowers who struggle to show consistent growth on tax returns
Imagine this: A small business owner runs a successful automotive shop and wants to refinance the mortgage on his property to make improvements to his growing business. The only problem standing between him, and the loan is a bankruptcy filed seven years ago that’s tainting his credit history. Although this borrower currently has a booming business and is credit-worthy, he will likely struggle when looking to secure a refinance because of a) poor credit history and b) insufficient documentation due to his self-employment status. This borrower could use a non-bank lender.
Working with a non-bank lender that offers reduced documentation solutions like a bank statement program will allow this small business owner to finally secure that mortgage he’s been searching for. And remember – while these solutions offer more opportunities, your client may need to pay a slightly higher interest rate.
Borrowers who require more flexibility than a bank is willing to provide
Even if a borrower can produce full documentation, they may still prefer to keep the process simple and only provide bank statements when applying for a commercial loan. This makes things much faster overall. Partnering with a non-bank lender for a bank statement program also allows borrowers to take advantage of other flexible options. Think less restrictive cash-out refinance options, a wider range of property eligibility (multifamily to automotive properties), and longer loan terms (15 to 30 years).
Our process is simple – if a borrower can’t produce tax return documentation (or doesn’t want to), our lender’s underwriters will instead accept 12 consecutive months of their business bank statements as income verification. Expert underwriters will then use this information to review and determine whether the borrower is fit for the Lite Doc program. More specifically, an industry standard expense factor to determine the borrower’s net income (the amount of money earned after paid taxes and business-related expenses) and the net cash flow available to cover the business, personal, and subject property debt obligations and debt service coverage is applied. With this program and process, you can feel confident that your client will receive the right solution for their financing needs.
Next Step
Now that you have a better idea on how a Bank Statement solution can fit your clients, you can get started on your own transaction! Make sure to complete the simple form today and get connected to a non-bank, direct lender that has a track record of success. There’s no need to use your SS# or Tax ID number
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