The Closed-End Bank Statement Second Mortgage program provides second-lien financing for self-employed borrowers and real estate investors who may not qualify using traditional income documentation. Depending on the loan purpose and borrower profile, qualification may be available using bank statements, 1099 income, Profit and Loss statements, DSCR, or other alternative documentation.
This Non-QM second mortgage option allows eligible borrowers to access property equity without refinancing an existing first mortgage.
Closed-End Second Mortgage Program Highlights
- Loan amounts up to $1,000,000
- Cash-out options available
- Minimum 640 FICO
- Maximum 85% CLTV/LTV, subject to program requirements
- DSCR options with ratios as low as 0.75
- Fixed-rate and adjustable-rate mortgage options
- Interest-only ARM options available
- Alternative income documentation permitted
- First-time real estate investors eligible
- No residual income verification requirement for qualifying programs
- Primary residences and investment properties may be eligible
Alternative Income Documentation Options
Borrowers may qualify using several alternative income documentation methods depending on the applicable program.
Bank Statement Income Documentation
Income may be calculated using:
- 12 months of bank statements
- 24 months of bank statements
- Personal or business bank statements, subject to program guidelines
1099 Income Documentation
Eligible self-employed borrowers and independent contractors may qualify using 1099 income documentation instead of traditional tax returns.
Profit and Loss Statement Only
P&L-only qualification may be available for eligible self-employed borrowers using a qualifying Profit and Loss statement without traditional tax-return income documentation.
DSCR Second Mortgage
Real estate investors may qualify based on the cash flow of the subject investment property rather than personal employment income.
- Minimum DSCR as low as 0.75
- Personal income documentation may not be required
- First-time investors may be eligible
No Ratio and Business Purpose Programs
Certain business-purpose second mortgage programs may be available without calculating a traditional debt-to-income ratio.
Traditional wage-earner income documentation may also be used when applicable.
Loan Amount and Cash-Out Limits
Loan amounts are available up to $3 million, subject to borrower qualifications, property type, documentation method, credit profile, and combined loan-to-value requirements.
Cash-out financing is available, with applicable limits determined by the specific program and qualification method.
Credit Score Requirements
The minimum qualifying credit score is 640 FICO, subject to the selected documentation type, loan amount, occupancy, property type, and CLTV.
Loan-to-Value and Combined Loan-to-Value
Financing may be available up to 85% LTV or CLTV for qualified borrowers.
Because this is a second mortgage, the combined loan-to-value calculation generally considers both the existing first mortgage and the new second mortgage.
Prepayment and Interest Rate Options
Available loan structures may include:
- Fixed-rate second mortgages
- Adjustable-rate mortgages
- Interest-only adjustable-rate options
Available terms and structures vary by borrower profile and program.
Eligible Property Types
Eligible properties may include:
- Single-family residences, attached or detached
- Planned Unit Developments (PUDs)
- Low-rise condominiums
- High-rise condominiums
- Site condominiums
- Townhouses
- 2–4 unit residential properties
- Modular homes
Property eligibility may vary according to occupancy, loan purpose, documentation method, and investor guidelines.
Eligible Borrowers
The program may be suitable for:
- Self-employed borrowers
- Independent contractors and 1099 earners
- Real estate investors
- First-time real estate investors
- Borrowers seeking to access equity without refinancing an existing first mortgage
- Borrowers who cannot document qualifying income using conventional tax-return or W-2 requirements
Second Mortgage Income Calculation Options
Additional Income Documentation Options:
- Bank statement income
- Debt Service Coverage Ratio (DSCR)
- Profit and Loss statement income
- 1099 income
- Self-employed income
- Asset depletion
The applicable calculation method depends on the selected loan program and borrower profile.
Available in the Following States
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, and Washington.
Last Updated on 2 months ago by Broker Mortgages